Deck 6: Proprietary Funds

Question 1

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

Answer 1

True
Explanation: Enterprise and internal service funds are both proprietary funds.

Question 2

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

Answer 2

True
Explanation: Enterprise funds use the accrual basis of accounting and the economic resources measurement focus.

Question 3

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.

Answer 3

True
Explanation: According to GASB Statement 34, enterprise funds must be used when certain criteria are met. They are 1) When debt is backed solely by fees and charges. 2) When a legal requirement exists that the cost of providing services for an activity, including capital costs, be recovered though fees or charges. Or 3) When a government has a policy to establish fees and charges to cover the cost of providing services for an activity.

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

Proprietary funds use the modified accrual basis of accounting.

Question 10

Proprietary Funds use the accrual basis of accounting.

Question 11

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

Question 12

Budgetary comparison schedules are not required for proprietary funds.

Question 13

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 14

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

Question 15

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

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

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

Question 18

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

Question 19

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

Question 20

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 21

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

Question 22

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 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

GASB requires that the reconciliation of income and cash flows from operations starts with an enterprise fund's operating income.

Question 30

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

Question 31

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

Question 32

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 33

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 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

An Enterprise Fund has an indefinite life.

Question 36

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

Question 37

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 38

GASB Cash Flow Statements require the indirect method to determine cash flows from operating activities.

Question 39

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 40

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

Question 41

As was true for governmental funds, major enterprise funds are to be presented, along with columns for nonmajor funds and total enterprise funds, where appropriate.

Question 42

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 43

According to GASB, restricted Net Position does not include net resources under constraints imposed by creditors, grantors, contributors, or laws or regulations of other governments.

Question 44

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

Question 45

With respect to proprietary funds, the net position i.e., fund equity) section of the Statement of Net Position is displayed within two categories: Restricted and Unrestricted Net Position.

Question 46

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

Question 47

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

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

Question 48

If the accounting treatment for a given transaction is not specified by a GASB pronouncement, a government may use nonauthoritative sources for guidance, including FASB standards dealing with similar events.

Question 49

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 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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 55

The required financial statements of proprietary funds include a Statement of Net Position, a Statement of Revenues, Expenses, and Changes in Fund Net Position. The Statement of Cash Flows is recommended, but not required.

Question 56

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

Question 57

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

Question 58

Major enterprise funds are to be presented in the aggregate with all funds combined.

Question 59

Proprietary funds must prepare the Statement of Cash Flows using the direct method and includes cash flows from operating activities, investing activities, capital and related financing activities, and noncapital-related financing activities.

Question 60

Which of the following statements is true regarding proprietary funds?

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

Question 61

Proprietary funds utilize what basis of accounting?

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

Question 62

Which financial statements are required for a proprietary fund?

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

Question 63

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

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

Question 64

GASB 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 65

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.

Question 66

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 67

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 68

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 69

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 70

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

A) I only.
B) II and RECORDING AND REPORTING TRANSACTIONS OF INTERNAL SERVICE FUNDS.
C) I and RECORDING AND REPORTING TRANSACTIONS OF INTERNAL SERVICE FUNDS.
D) I, II, and RECORDING AND REPORTING TRANSACTIONS OF INTERNAL SERVICE FUNDS.

Question 71

According to GASB, 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 72

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

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

Question 73

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 74

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 75

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 76

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 77

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

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

Question 78

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

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

Question 79

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 80

Pollution remediation costs:

A) Are to be accrued as a liability in the 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