Deck 6: Proprietary Funds

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

Budgetary comparison schedules are not required for proprietary funds.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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.

Question 7

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

Question 8

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.

Question 9

The excess of assets over liabilities of proprietary funds is termed "Net Position."

Question 10

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

Question 11

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

Question 12

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 13

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

Question 14

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

Question 15

Proprietary Funds use the accrual basis of accounting.

Question 16

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 17

Proprietary funds use the modified accrual basis of accounting.

Question 18

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

Question 19

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

Question 20

Financial statements for proprietary funds are prepared using the economic resources measurement focus.

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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 31

Long term liabilities of an enterprise fund are reported in the proprietary fund statement and in government-wide statements.

Question 32

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

Question 33

An Enterprise Fund has an indefinite life.

Question 34

The Proprietary Fund Statement of Net Position may choose whether to classify assets and liabilities between current and long-term.

Question 35

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

Question 36

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

Question 37

Proprietary funds do not record capital assets,depreciation on those capital assets,and long-term debt.

Question 38

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 39

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 40

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

Question 41

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 solely by fees and charges.
C) When a government has a policy to establish fees and charges to cover the cost of providing services for an activity.
D) All of the above.

Question 42

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 43

Restricted Net Position for a proprietary fund is:

A) Net resources whose use is restricted by users of the services.
B) Reported net of depreciation.
C) Reported net of accumulated depreciation and any outstanding debt used to acquire the asset.
D) Net resources whose use is restricted by creditors, grantors or laws or regulations of other governments.

Question 44

GASB Cash Flow Statements requires the following classification of cash flows:
Operating,Investing,and Financing.

Question 45

Which of the following statements is true regarding proprietary funds?

A) Proprietary funds use the modified accrual basis of accounting.
B) Accruals and deferrals common to business accounting are recorded in proprietary funds.
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

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

A) Internal service funds use modified accrual accounting and the current financial resources measurement focus
B) Net position is 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 47

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 48

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

Question 49

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

Question 50

Which financial statements are required for a proprietary fund?

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

Question 51

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 52

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

A) Net Investment in Capital Assets, Restricted Net Position and Unrestricted Net Position
B) Spendable Net Position and Spendable Net Position
C) Committed Net Position, Assigned Net Position and Unassigned Net Position
D) Restricted Fund balance, Committed Fund balance, Assigned Fund Balance, and Nonspendable Fund Balance

Question 53

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

Question 54

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

A) Swimming pool.
B) Printing Services.
C) Airport.
D) Lottery.

Question 55

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

Question 56

According to GASB 34,restricted Net Position does not include those that are the results of constraints imposed by creditors,grantors,contributors,or laws or regulations of other governments.

Question 57

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 58

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

Question 59

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

Question 60

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

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

Question 61

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 Position.
D) Nonoperating Revenues-Proceeds of Bonds.

Question 62

Which of the following is true of the Statement of Net Position 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) Both A and B are correct.
D) Neither A nor B are correct.

Question 63

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 Position 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 Position, the Net position is reported as either reserved or unreserved.

Question 64

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 65

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 66

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 67

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) Agency fund.
C) Internal service fund.
D) Advance fund.

Question 68

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 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) Internal service fund.
C) Permanent fund.
D) Enterprise fund.

Question 70

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 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 to be accrued as a liability in the basic financial statements.
B) Are recorded as expenses if they will be paid from current resources.
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

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 74

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 75

Proprietary funds utilize what basis of accounting?

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

Question 76

Montgomery County operates a landfill as an enterprise fund. The closure and post-closure care costs are estimated to be $25 million. It is estimated that the capacity of the landfill is 12 million tons of waste and that waste will be accepted for 5 years.During 2015,3 million tons of waste was accepted. The charge for closure and post-closure care costs for 2015 would be:

A) $ 6.25 million.
B) $ 5.8 million.
C) $ 5 million.
D) $ 2.4 million.

Question 77

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) Unearned revenue to the enterprise fund.
D) Capital contributions to the enterprise fund.

Question 78

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

A) GASB requires that certain post-closure 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 post-closure 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 79

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 80

Proprietary funds:

A) Are required to present budget-actual statements in the fund statements.
B) Are required to present a reconciliation between the Statement of Revenues, Expenses, and Changes in Fund Net Position and the Cash Flow Statement.
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.