Deck 6: Proprietary Funds

Question 1

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.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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 3

False

Question 4

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

Question 5

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

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

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

Question 8

Financial statements for proprietary funds are similar in many respects to those of business organization.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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 18

Internal service funds account for services provided to citizens and others on a user charge basis.

Question 19

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

Question 20

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 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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 26

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

Question 27

GASB requires the indirect method to determine cash flows.

Question 28

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

Question 29

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 30

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

Question 31

An Enterprise Fund has an indefinite life.

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,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 Assets,but is reported separately in the statement of Revenues,Expenses and Changes in Fund Net Assets.

Question 34

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

Question 35

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

Question 36

Proprietary Funds use the modified accrual basis of accounting.

Question 37

Proprietary funds use the accrual basis of accounting because these funds engage in activities similar to those of profit-seeking businesses.

Question 38

Proprietary funds are required to have a Statement of Revenues,Expenses,and Change in Net Assets,a Statement of Net Assets,and a Statement of Cash Flows.

Question 39

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

Question 40

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

Question 41

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 disclose contributions of capital assets on the Cash Flow Statement.
D) Are required to present a Statement of Revenues and Expenses and Balance sheet.

Question 42

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

Question 43

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

Question 44

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 long-term assets is recorded as an expenditure in proprietary funds.

Question 45

Budgetary comparison schedules are required for proprietary funds.

Question 46

When governments operate landfills,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 47

Restricted Net Assets for a proprietary fund:

A) Are net resources whose use is restricted by law.
B) Are reported net of acquisition debt.
C) Are net resources whose use is restricted by creditors, grantors or other governments.
D) Are reported net of depreciation.

Question 48

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

Question 49

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 and Spendable Fund Balance

Question 50

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

A) When debt is backed by the full faith and credit of the government issuing it.
B) When the legal requirement exists that the cost of providing services for an activity, including capital costs, be recovered through fees or charges.
C) When a government is restricted by grant covenants to cover the cost of providing services for an activity.
D) None of the above circumstances would require the use of an enterprise fund.

Question 51

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

Question 52

Long term debt serviced from proprietary funds are recorded in the proprietary fund.

Question 53

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

Question 54

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 55

The users of goods or services provided by proprietary funds are charged based on their consumption of the goods or services.

Question 56

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 57

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 58

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

A) Internal service funds use accrual accounting and the economic resource 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 long-term fixed assets.
D) All of the above are false statements.

Question 59

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 60

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

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

Question 61

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 62

Funds that are used to account for activities similar to those often engaged in by profit-seeking businesses are:

A) Proprietary funds.
B) Special revenue funds.
C) Capital project funds.
D) Agency funds.

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

Question 64

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.
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 65

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 66

Proprietary funds utilize what basis of accounting?

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

Question 67

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) Expenditures.
C) Operating Revenues-Charges for Services.
D) Due from General Fund.

Question 68

The City of Brewster operated a motor pool fund as an internal service fund.A loan of $600,000 was made from an enterprise fund,to be repaid over 10 years with no interest.Capital assets were purchased as follows: land,$200,000; buildings (40 year life),$800,000; equipment (10 year life),$300,000; automobiles (4 year life,)$1,250,000.In addition,fuel costs were expected to be $100,000 and salaries were expected to be $200,000.A budget is prepared to breakeven,using full accrual accounting,plus pay back one year's principal on the loan.It is anticipated that cars will be driven 2,000,000 miles.The cost per mile would be:

A) $0.39.
B) $0.33.
C) $0.36.
D) $0.23.

Question 69

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

A) Indirect
B) Direct
C) Modified direct
D) modified indirect

Question 70

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 an enterprise fund and in the government-wide statements.
C) Both of the above.
D) Neither of the above.

Question 71

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.

Question 72

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 73

Pollution remediation costs:

A) Are recorded as expenses when incurred if they will be paid from current resources.
B) Are to be accrued as a liability in the basic financial statements as required by GASB Statement 49.
C) Can be the responsibility of state and local governments even if the government did not operate, but merely used the site.
D) B and C are correct statements.

Question 74

Which of the following is false regarding proprietary funds financial statements?

A) Major internal service funds are separately reported.
B) Discretely presented component units that are business-type in nature are not reported; those units would be in the government-wide statements only.
C) A classified approach must be used when preparing the Statement of Net Assets where current assets are displayed separately from long-term assets and current liabilities are displayed separately from long-term liabilities.
D) With respect to the Statement of Net Assets, the net assets are displayed in the same three categories as in the government-wide statements.

Question 75

In the Statement of Net Assets for proprietary funds,GASB requires a classified format where current assets,noncurrent assets,current liabilities,and noncurrent liabilities are presented:

A) Separately.
B) Combined.
C) Intermingled.
D) Not at all.

Question 76

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, capital and related financing and noncapital related financing
D) Operating, financing and noncapital related financing activities

Question 77

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

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

Question 78

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 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

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 2012,2.9 million tons of waste was accepted.The charge for closure and postclosure care costs for 2012 would be:

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