Deck 6: Proprietary Funds

Question 1

Activities that produce goods or services to be provided to other departments or other governmental units on a cost-reimbursement basis are accounted for by enterprise funds.

Answer 1

False

Question 2

An enterprise fund should be used when the government has a policy to establish fees to cover the costs of providing services for an activity.

Answer 2

True

Question 3

Unlike enterprise funds,it is frequently desirable for internal service funds to operate at a profit.

Answer 3

False

Question 4

Financial statements for proprietary funds are prepared using the current financial resource measurement focus.

Question 5

An internal service fund is required whenever an activity is funded by fees or charges from other government departments.

Question 6

An enterprise fund is required if there is a legal requirement that the cost of providing services for an activity,including capital costs,be recovered through fees or charges.

Question 7

Enterprise funds are reported in the fund-basis statements only.

Question 8

The excess of assets over liabilities of proprietary funds is termed "Fund Balance"

Question 9

Proprietary funds use the accrual basis of accounting.

Question 10

Proprietary Funds use the modified accrual basis of accounting.

Question 11

Internal Service Funds account for activities that produce goods or services to be provided to outside customers on a cost reimbursement basis.

Question 12

An enterprise fund should be used when a legal requirement exists that the cost of providing services are to be recovered through fees or charges.

Question 13

Enterprise funds use the economic resources measurement focus and accrual basis of accounting

Question 14

Internal Service funds are reported in the fund-basis statements only.

Question 15

The most numerous and important enterprise services rendered by local governments are public utilities.

Question 16

An enterprise fund should be used when debt is back solely by fees and charges

Question 17

Enterprise funds are used to account for activities similar to those engaged in profit-seeking businesses.

Question 18

Budgetary comparison schedules are required for proprietary funds.

Question 19

The term "fiduciary funds" includes enterprise and internal service funds.

Question 20

Enterprise Funds and Internal Service Funds are part of the larger category of Proprietary Funds.

Question 21

The Balance Sheet and the Statement of Revenues,Expenditures,and Changes in Fund Balances are required for Proprietary funds.

Question 22

FASB requires that the reconciliation of income and cash flows from operations starts with operating income.

Question 23

Proprietary funds are required to have a Statement of Revenues,Expenses,and Change in Net Assets,a Statement of Net Assets,but not a Statement of Cash Flows.

Question 24

GASB requires the indirect method to determine cash flows from operating activities.

Question 25

An Enterprise Fund has an indefinite life.

Question 26

Long term liabilities of an enterprise fund are not reported in the proprietary fund statements,but are reported in government-wide statements.

Question 27

Proprietary funds use the economic resources measurement focus and modified accrual basis of accounting.

Question 28

Impact fees charged to real estate developers are recorded in an enterprise fund as capital contributions,a nominal account that will increase Net Assets,but is reported separately in the statement of Revenues,Expenses and Changes in Fund Net Assets.

Question 29

Fund-basis financial statements prepared for proprietary funds include the Statement of Net Assets,Statement of Revenues,Expenses,and Changes in Fund Net Assets,and the Statement of Cash Flows.

Question 30

The Proprietary Fund Statement of Revenues,Expenses,and Changes in Fund Net Assets must include a performance indicator,such as operating income.

Question 31

GASB requires that the reconciliation of income and cash flows from operations starts with operating income.

Question 32

Proprietary funds record capital assets,depreciation on those capital assets,and long-term debt.

Question 33

When estimating uncollectible accounts,an enterprise fund will record a debit to Bad Debt Expense and a credit to Accumulated Provision for Uncollectible Accounts.

Question 34

Municipal solid waste landfills,when accounted for as proprietary funds,record a liability for closure and post-closure care costs; recording expenses on a units of production basis.

Question 35

Investment pools are an example of an activity that may be accounted for in an internal service fund.

Question 36

The Proprietary Fund Statement of Net Assets must classify assets and liabilities between current and long-term.

Question 37

Cash flow statements of proprietary funds must use the direct method for recording cash flows from operations.

Question 38

Postclosure costs are recorded in a solid waste landfill enterprise fund at the present value of estimated future costs.

Question 39

The four categories on the Statement of Cash Flows for a proprietary fund are operating,non-capital financing activities,capital and related financing activities,and investing activities.

Question 40

Capital assets constructed by an internal service fund are recorded in a capital projects fund.

Question 41

According to GASB 34,restricted net assets include those that are the results of constraints imposed by creditors,grantors,contributors,or laws or regulations of other governments.

Question 42

Centralized purchasing,computer services,and janitorial services are examples of activities that are commonly reported in:

A) Enterprise funds.
B) Capital project funds.
C) Debt service funds.
D) Internal service funds.

Question 43

Long term debt serviced from proprietary funds is recorded in the Long Term Debt Account Group.

Question 44

An example of an activity that would not normally be accounted for in an enterprise fund would be:

A) Swimming pool.
B) Motor pool.
C) Airport.
D) Lottery.

Question 45

Which of the following statements is true regarding proprietary funds?

A) Accruals and deferrals common to business accounting are recorded in proprietary funds.
B) Proprietary funds use the modified accrual basis of accounting
C) GASB standards require budget-actual reporting for proprietary funds.
D) The purchase of a capital asset is recorded as an expenditure in proprietary funds.

Question 46

Proprietary funds report using the current financial resources measurement focus and the modified accrual basis of accounting.

Question 47

Which financial statements are required for a proprietary fund?

A) Income statement, Statement of Net Assets and Statement of Cash Flows
B) Statement of Revenues, Expenses and Changes in Net Assets, Statement of Net Assets and Statement of Cash Flows
C) Statement of Revenues, Expenses and Changes in Fund Balance and Statement of Net Assets, and Statement of Cash Flows
D) Statement of Revenues, Expenses and Changes in Net Assets and Statement of Net Assets

Question 48

Proprietary funds use the economic resources measurement focus and accrual basis of accounting.

Question 49

Long term debt serviced from proprietary funds is reported only in the government-wide Statement of Net Assets.

Question 50

Which of the following is correct with respect to Internal Service Funds?

A) Internal service funds use accrual accounting and the economic resource measurement focus
B) Net Assets (fund equity) are to be reported in two categories: assigned and unassigned
C) Internal service funds account for long-term debt but not capital assets
D) All of the above are false statements

Question 51

According to GASB 34,restricted net assets include those that are the results of constraints imposed by law through constitutional provisions or enabling legislation.

Question 52

GASB Cash Flow Statements requires four classifications of cash flows instead of the 3 required by FASB.

Question 53

Unlike internal service funds,it is frequently desirable for enterprise funds to operate at a profit.

Question 54

The categories of Net assets for a proprietary fund are classified within which of the following categories?

A) Net Assets Invested in Capital Assets Net of Related Debt, Restricted Net Assets and Unrestricted Net Assets
B) Spendable Net Assets and Spendable Net Assets
C) Committed Net Assets, Assigned Net Assets and Unassigned Net Assets
D) Restricted Fund balance, Committed Fund balance, Assigned Fund Balance, and Nonspendable Fund Balance

Question 55

Which of the following is not true regarding proprietary funds?

A) Enterprise funds are used by governments to account for services provided to the general public on a user-charge basis.
B) General obligation bonds that will be paid from enterprise revenues must be reflected in the accounts of enterprise funds.
C) Internal service self-insurance should set fees based on anticipated charges or a long-range plan to break even over time.
D) The operation of internal service funds has no impact on other funds because it is run as a business and provides services that would have been purchased elsewhere by the other funds.

Question 56

An example of an activity that would not normally be accounted for in an internal service fund would be:

A) Motor pool.
B) Garbage collection.
C) Print shop.
D) Central storeroom.

Question 57

Internal service funds account for

A) Activities that produce goods or services to be provided to other governmental units on a cost reimbursement basis.
B) Activities that produce goods or services to be provided to outside consumers units on a cost reimbursement basis.
C) Both A and B.
D) None of the above.

Question 58

Restricted Net Assets for a proprietary fund:

A) Are net resources whose use is restricted by law
B) Are reported net of depreciation
C) Are reported net of accumulated depreciation and any outstanding debt used to acquire the asset
D) Are net resources whose use is restricted by creditors, grantors or other governments.

Question 59

GASB Statement 34 requires enterprise funds to be used under which of the following circumstances?

A) When the legal requirement exists that the cost of providing services for an activity, including capital costs, be recovered through fees or charges.
B) When debt is backed by the full faith and credit of the government issuing it.
C) When a government is restricted by grant covenants to cover the cost of providing services for an activity.
D) All of the above.

Question 60

The reconciliation on the statement of cash flows for a proprietary fund under GASB requirements is between operating income and cash flows from operating activities.

Question 61

Solid waste landfills are required to estimate the cost of closure which include:

A) Cost of equipment used.
B) Cost of landfill cover.
C) Cost of caring for the site for 30 years.
D) all of the above.

Question 62

An internal service fund provided services to a General Fund department.At the time of billing,the credit entry in the internal service fund would be:

A) Other Financing Sources-Transfers In.
B) Operating Revenues-Charges for Services.
C) Other Financing Sources-Charges for Services.
D) Due from General Fund.

Question 63

According to GASB Statement 34,restricted net assets are those that are the result of constraints from:

A) Imposed by law though constitutional provisions
B) Imposed by enabling legislation
C) Imposed by creditors or grantors
D) All of the above

Question 64

GASB requires the ____________ method to report cash flows from operating activities in the Statement of Cash Flows.

A) Indirect.
B) Direct.
C) Modified accrual
D) Full accrual

Question 65

Which of the following is false regarding proprietary fund accounting?

A) The economic resources measurement focus and accrual accounting are used.
B) Capital assets are recorded in the accounts and depreciated over their useful lives.
C) The Statement of Net Assets must be in a classified format, with current assets separated from noncurrent assets and current liabilities separated from noncurrent liabilities.
D) In the Statement of Net Assets, the net assets are reported as either reserved or unreserved.

Question 66

The estimated costs of closure of solid waste landfills are measured using:

A) Estimated future costs.
B) Actual closure costs.
C) Historical costs.
D) Current costs.

Question 67

When governments operate landfills as enterprise funds,which of the following is correct?

A) GASB requires that certain postclosure costs be estimated and accrued during the period the landfills receive solid waste.
B) GASB requires that a portion of future estimated costs be charged as an expense and liability of the landfill using units-of-production method as waste is accepted.
C) The purpose of recording postclosure expenses and liabilities is to match the estimated costs with the revenues during the period of time the waste is accepted.
D) All of the above are correct

Question 68

Proprietary funds utilize what basis of accounting?

A) Modified accrual.
B) Accrual.
C) Cash.
D) Budgetary.

Question 69

Governmental units use which fund type to account for services provided to the general public on a user-charge basis?

A) General Fund.
B) Enterprise fund.
C) Permanent fund.
D) Internal service fund.

Question 70

Montgomery County operates a landfill as an enterprise fund.The closure and postclosure care costs are estimated to be $24 million.It is estimated that the capacity of the landfill is 12 million tons of waste and that waste will be accepted for 4 years.During 2014,2.9 million tons of waste was accepted.The charge for closure and postclosure care costs for 2014 would be:

A) $ 6 million.
B) $ 5.8 million.
C) $ 4.5 million.
D) $ 3 million

Question 71

The Statement of Cash Flows for a proprietary fund would include which of the following?

A) Operating, investing, financing
B) Operating, capital and related financing, investing
C) Operating, investing, fiduciary and capital related financing activities
D) Operating, investing, capital and related financing and noncapital related financing

Question 72

Pollution remediation costs:

A) Are recorded as expenses if they will be paid from current resources.
B) Are to be accrued as a liability in the basic financial statements.
C) Are not an issue is the state or local government merely used (but did not operate) the polluted site.
D) All of the above

Question 73

Proprietary funds:

A) Are required to present a reconciliation between the Statement of Revenues, Expenses, and Changes in Fund Net Assets and the Cash Flow Statement
B) Are required to present budget-actual statements in the fund statements
C) Are not required to accrue interest due more than 30 days after the end of the fiscal year
D) Are required to present a Statement of Revenues and Expenses and Balance sheet.

Question 74

Which of the following is true of the Statement of Net Assets for proprietary funds?

A) a classified format is used in which current assets, noncurrent assets, current liabilities, and noncurrent liabilities are presented separately.
B) separate disclosure is required for major enterprise funds and a total for all non-major enterprise funds
C) Neither A nor B are correct.
D) Both A and B are correct.

Question 75

Revenue bonds sold by a water utility fund,upon sale,would be recorded in an enterprise fund as:

A) Other Financing Sources-Proceeds of Bonds.
B) A liability.
C) A direct addition to Net Assets.
D) Nonoperating Revenues-Proceeds of Bonds.

Question 76

Which of the following are best described as proprietary funds?
I)Internal Service funds
II)Pension funds
III)Enterprise funds

A) I only.
B) I and II.
C) I and III.
D) I, II, and III.

Question 77

Activities that produce goods or services to be provided to other departments or other governmental units would be reported in which fund?

A) Enterprise fund.
B) Internal service fund.
C) Agency fund.
D) Advance fund.

Question 78

For landfills accounted for as enterprise funds,a portion of the estimated cost of closure of solid waste landfills should be charged as an expense and a liability of the landfill operation each year on a:

A) Actual cost method.
B) Units-of-production method.
C) Estimated cost method.
D) None of the above.

Question 79

Which of the following is true regarding the recording of long term debt in an enterprise fund?

A) When revenue bonds are sold at par, Cash is debited and Bonds Payable is credited.
B) The bonds would be reported in both an enterprise fund and in the government-wide statements.
C) Both of the above.
D) Neither of the above.

Question 80

Impact fees imposed on commercial developers by an enterprise fund and not associated with specific projects or improvements are recorded as:

A) Transfers from the enterprise fund to a capital projects fund.
B) Operating revenues to the enterprise fund.
C) Capital contributions to the enterprise fund.
D) Unearned revenue to the enterprise fund.