The Utility Enterprise Fund is in Year 2 of a three-year construction project that is projected to cost $3,000,000. The fund incurred $300,000 of costs in Year 1 and $1,800,000 in Year 2. The fund will report

Question

Quizplus · Accepted Answer

The correct answer is C because in governmental accounting, particularly for a Utility Enterprise Fund which operates similarly to a private business, costs for a construction project are capitalized, not expensed. Therefore, the construction in progress (CIP) account would include the cumulative costs incurred to date. By Year 2, this would be $300,000 from Year 1 plus $1,800,000 incurred in Year 2, totaling $2,100,000.

The Utility Enterprise Fund Is in Year 2 of a Three-Year