Multiple Choice. Choose the best answer.
1. Which of the following correctly states the role of budgeting in proprietary funds?
a. Proprietary fund managers should ensure that a valid appropriation exists before providing goods or services to other funds or departments of the same government.
b. Proprietary fund managers should have discretion to operate within a flexible budget consistent with pricing and other policies established by the legislative body.
c. To ensure that appropriations are not overspent, all proprietary funds should use encumbrance procedures.
d. Expenditures from proprietary funds should not be made unless there is a valid appropriation authorizing the expenditure.
2. Which of the following would most likely be accounted for in an internal service fund?
a. City golf courses.
b. The city’s investments, which are pooled with the county’s and the school district’s investments.
c. An asphalt plant used to supply the asphalt needed to resurface the city’s streets.
d. Proceeds from an endowment that are used to maintain the city’s cemeteries.
3. The Computer Services Department operates as an internal service fund. It has billed the Parks and Recreation Department $3,000 for the services provided by its computer technicians. How would this be shown at the government-wide level?
a. It would be an increase in governmental activities expenses of $3,000.
b. It would be an increase in governmental activities internal balances of $3,000.
c. It would be an increase in business-type activities revenues of $3,000.
d. There would be no increase in governmental activities.
4. The City of Jenkins operates a central motor pool as an internal service fund for the benefit of the city’s other funds and departments. In 2011, this fund billed the Community Services Department $30,000 for vehicle rentals. What account should the internal service fund use to record these billings?
a. Interfund Transfers In.
b. Interfund Exchanges.
c. Billings to Departments.
d. Cost of Providing Rentals to Other Funds and Units.
5. Which of the following events would generally be classified as nonoperating on an enterprise fund’s statement of revenues, expenses, and changes in net assets?
a. Billing other funds of the same government for services.
b. Loss on the sale of a piece of equipment.
c. Depreciation expense.
d. Administrative expense.
6. During 2011 Darden City reported the following operating receipts from self-sustaining activities paid by users of the services rendered:
Operations of water supply plant $4,000,000
Operations of transit system 800,000
What amounts should be reported as operating revenues of Darden’s enterprise funds?
a. $4,800,000.
b. $4,000,000.
c. $800,000.
d. $0.
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?
a. Interest earned on certificates of deposit held by the proprietary fund.
b. Purchase of equipment for use by the proprietary fund.
c. Grant received to construct a building that will be used by the proprietary fund.
d. All of the above would be considered investing activities for reporting purposes.
8. The proceeds of tax-supported bonds issued for the benefit of an enterprise fund and being serviced by a debt service fund:
a. Should not be reported by the enterprise fund at all.
b. Should be reported in the notes to enterprise fund statements but not in the body of any of the statements.
c. Should be reported in the enterprise fund as long-term debt.
d. Should be reported in the enterprise fund as a contribution or interfund transfer in the statement of revenues, expenses, and changes in net assets.
9. During the year an enterprise fund purchased $230,000 worth of equipment. The equipment was acquired with a cash down payment of $23,000 and a $207,000 loan. What is the net effect of this transaction on the net asset accounts of the enterprise fund?
a. Invested in capital assets, net of related debt is increased by $23,000.
b. Invested in capital assets, net of related debt is increased by $230,000.
c. Invested in capital assets, net of related debt is increased by $207,000.
d. Invested in capital assets, net of related debt is decreased by $207,000.
10. The financial statements required by GASB for a proprietary fund are:
a. Balance sheet and statement of revenues, expenditures, and changes in net assets.
b. Balance sheet; statement of revenues, expenditures, and changes in fund balance: statement of cash flows.
c. Statement of net assets: statement of revenues, expenses, and changes in fund net assets; statement of cash flows.
d. Balance sheet and statement of revenues, expenses, and changes in retained earnings.