Deck 21: Accounting for State and Local Governmental Units - Proprietary and Fiduciary Funds

Question 1

At December 31,2011,an Enterprise Fund has the following adjusted accounts outstanding: When preparing the closing entry for the temporary accounts at December 31,2011,the Enterprise Fund's accountant will

A)credit Retained Earnings $8,000.
B)credit Net Cash,$8,000.
C)credit Net Assets,Unrestricted $8,000.
D)credit Invested Capital Assets,Net of Related Debt,$8,000.

Answer 1

C

Question 2

Enterprise funds are accounted for in a manner similar to

A)internal service funds.
B)capital project funds.
C)special revenue funds.
D)debt service funds.

Answer 2

A

Question 3

On January 1,2011,the Enterprise Fund for a local city receives an operating grant of $100,000 cash from the state government.Upon receipt of the cash,qualifying expenses of $200,000 for the operating grant have been incurred.What journal entry did the Enterprise Fund prepare on January 1,2011?

A)Debit Cash $100,000,credit Deferred Revenue $100,000
B)Debit Cash $100,000,credit Contributed Capital $100,000
C)Debit Restricted Cash $100,000,credit Nonoperating Revenues $100,000
D)Debit Restricted Cash $100,000,credit Other Financing Sources - operating grant $100,000

Answer 3

C

Question 4

What is a significant difference for agency funds when compared to governmental funds?

A)An agency fund has a separate ledger.
B)An agency fund does not report revenues.
C)Agency funds are not associated with any governmental unit.
D)An agency fund will not balance because there is no fund balance account.

Question 5

GASB requires ________ method(s)for the cash flow statement for proprietary funds.

A)the reconciliation
B)the indirect
C)the direct
D)either the direct or indirect

Question 6

The accounting equation for the enterprise fund is

A)assets = liabilities.
B)current assets + current liabilities = fund balance.
C)current assets - current liabilities = net assets.
D)current assets + noncurrent assets - current liabilities - noncurrent liabilities = net assets.

Question 7

Platinum City collects state sales taxes quarterly from local businesses and then gives the state revenue department the money at the end of the year.The sales taxes would go in Platinum City's

A)special revenue fund.
B)general fund.
C)agency fund.
D)enterprise fund.

Question 8

The financial statements of proprietary funds are similar to business enterprises with the exception that proprietary funds do not

A)report fixed assets.
B)report property taxes.
C)separate current and noncurrent assets.
D)report noncurrent liabilities.

Question 9

On the Statement of Net Assets,in place of stockholders' equity,proprietary funds report

A)Retained Earnings only.
B)Restricted Cash only.
C)Unrestricted Cash only.
D)Net Assets.

Question 10

What basis of accounting is used by fiduciary funds?

A)Modified accrual accounting
B)Accrual accounting
C)Cash basis accounting
D)Present value accounting

Question 11

Proprietary funds are required to prepare financial statements that include: A.Statement of Activities
B)Statement of Revenues,Expenditures and Changes in Fund Balance
C)Balance Sheet
D)Statement of Cash Flows
E)Statement of Net Assets
F)Statement of Revenues,Expenses and Changes in Net Assets

A)C,D,F
B)A,B,D
C)B,C,D
D)D,E,F

Question 12

The fixed assets and long-term liabilities associated with Proprietary Funds are reported on the

A)financial statements of governmental funds.
B)financial statements of fiduciary funds.
C)financial statements of proprietary funds.
D)financial statements of trust funds.

Question 13

On January 1,2011,the General Fund contributes $200,000 cash to the Internal Service Fund.On January 1,2011,the General Fund also loans $100,000 cash to the Internal Service Fund.On January 1,2011,what journal entry does the Internal Service Fund prepare?

A)debit Cash $300,000,credit Other Financing Sources $300,000
B)debit Cash $300,000,credit Other Financing Sources $200,000,credit Advance from General Fund $100,000
C)debit Cash $300,000,credit Advance from General Fund $300,000
D)debit Cash $300,000,credit Nonreciprocal Transfer from General Fund $200,000,credit Advance from General Fund $100,000

Question 14

Proceeds from bonds issued for the construction of capital assets are classified on the Statement of Cash Flows for an Enterprise Fund as

A)Cash Flows from Operating Activities.
B)Cash Flows from Noncapital Financing Activities.
C)Cash Flows from Capital and Related Financing Activities.
D)Cash Flows from Investing Activities.

Question 15

What basis of accounting is used by proprietary funds?

A)Modified accrual accounting
B)Accrual accounting
C)Cash basis accounting
D)Fair value accounting

Question 16

The trust fund for a school library is required to prepare financial statements that include

A)Balance Sheet and Income Statement.
B)Statement of Revenues,Expenses and Changes in Fiduciary Net Assets.
C)Statement of Fund Balance and Statement of Changes in Fund Balance.
D)Statement of Fiduciary Net Assets and Statement of Changes in Fiduciary Net Assets.

Question 17

An enterprise fund collects $100,000 cash for customer deposits to insure timely payment for services.What journal entry did the enterprise fund prepare?

A)Debit Cash $100,000,credit Revenue $100,000
B)Debit Cash $100,000,credit Deferred Revenue $100,000
C)Debit Restricted Cash $100,000,credit Customer Deposits $100,000
D)Debit Restricted Cash $100,000,credit Revenue $100,000

Question 18

In a Statement of Cash Flows for a proprietary fund,what are the primary categories of cash flow activities?

A)Operating,Financing,Investing
B)Operating,Noncapital Financing,Capital and Related Financing,Investing
C)Operating,Financing,Noncapital Investing,Capital and Related Investing
D)Noncapital Operating,Capital and Related Operating,Investing,Financing

Question 19

Interest payments on loans outstanding that do not relate to acquiring,constructing or improving capital assets are classified as ________ on the cash flow statement for an Enterprise Fund.

A)Cash Flows from Operating Activities
B)Cash Flows from Noncapital Financing Activities
C)Cash Flows from Capital and Related Financing Activities
D)Cash Flows from Investing Activities

Question 20

The financial statements of a proprietary fund are similar to those of a business enterprise except for

A)proprietary funds do not report income taxes on the operating statement.
B)proprietary funds do not have paid-in capital or capital stock.
C)proprietary funds use modified accrual accounting.
D)both A and B

Question 21

An adjusted trial balance is provided below for the Dade County copy services department at June 30,2011.
Required:
1.Prepare a statement of revenues,expenses and changes in net assets for the copy services department for the year ended June 30,2011.
2.Prepare a statement of net assets for the copy services department at June 30,2011.Assume all assets are not externally or internally restricted.

Question 22

Based upon the flow information provided below for the year ending December 31,2011,prepare a cash flow statement for the Downtown City Motor Pool,an internal service fund.

Question 23

Thoroughgood County has a municipal golf course and tennis club which is funded by the membership fees it charges.The club also has 6% bonds outstanding amounting to $20,000,000 on which it pays interest semi-annually.The club had the following transactions.
1.An addition to the golf clubhouse was added for $2,000,000,funded out of operations.
2.The following expenses were incurred and paid: $80,000 wages;$10,000 payroll taxes;$45,000 water bill;and $12,000 equipment repair.
3.Interest on the bonds was paid amounting to $600,000.
4.$5,000,000 of operating cash excess was repaid to the general fund for a previous loan.
5.Depreciation of $500,000 was recorded for the buildings.
Required:
Prepare the necessary journal entries for each of the above transactions for the Enterprise Fund.

Question 24

Journalize the following municipal zoo transactions in the Lackluster County Enterprise Fund:
1.The zoo issued $1,000,000 of 5% revenue bonds at 99 on July 1,2011 (an interest payment date).The bond proceeds are to be used for a new polar bear exhibit and the issue will mature in 20 years.Interest is paid on January 1 and July 1.
2.Depreciation for the year-ended December 31,2011 included $175,000 for buildings and $105,000 for outdoor exhibit areas.
3.The zoo paid $800,000 in construction costs for the new exhibit.The exhibit is still under construction.
4.Interest on the revenue bonds was accrued at year-end,December 31,2011.Straight-line amortization is used for bond discounts and premiums.

Question 25

Willborough County had the following transactions in 2012.
1.A central motor pool was established with a $200,000 nonreciprocal transfer from the General Fund.
2.The water and sewer authority,which provides services to residents for a fee,issued a bond offering at $750,000 par.Bonds proceeds are restricted to renovating the treatment facility.
3.Willborough received a grant from the state to be used for renovation of the courthouse amounting to $800,000.The General Fund will temporarily provide $100,000 cash,because the grant is set up on a reimbursement basis and will not be distributed until proper expenditures are documented.
4.Willborough's central motor pool bills out automobile usage to various government agencies amounting to $42,000.
5.The General Fund transfers $67,000 out of the operating budget to fund the county employees' pension plan.
Required:
Prepare the necessary journal entries for each of the above transactions for all funds affected.Be sure to identify the fund type for each entry.

Question 26

Journalize the following utility transactions in the Quest County Enterprise Fund:
1.Billings to external customers $1,600,000;billings to Quest County governmental funds $130,000.
2.Collected refundable deposits from new customers $10,000.
3.Collected 95% of all billings by fiscal year-end.
4.Refunded $4,000 in deposits to former customers.
5.Unbilled services to outside customers at year-end $14,000.

Question 27

Jefferson County had the following transactions in 2012.
1.$27,000 in membership fees was collected at the municipal pool.
2.A county collects $130,000 in sales taxes on behalf of the cities within its boundaries.
3.A $500,000 bond offering was issued at 102 to fund the construction of a new city hall.The premium on the bonds was transferred to the Debt Service Fund(nonreciprocal).
4.A private foundation contributes a stock portfolio with a fair value of $100,000 to the county.A trust agreement specifies the earnings on the fund is to be used by the local park which is owned and operated by a private foundation,and the principal is to be held intact indefinitely.
5.The county sends bills out for water and sewer provided to residents,amounting to $340,000.
Required:
Prepare the necessary journal entries for each of the above transactions for all funds affected.Be sure to identify the fund type for each entry.

Question 28

The City of Sill established an Internal Service Fund to provide cleaning services to all city offices and departments.The following transactions took place with respect to this event.
1.The General Fund contributed cash of $49,000 to the Internal Service Fund.The General Fund provided a $10,000 loan to the Internal Service Fund.
2.On January 1,2011,the Internal Service Fund acquired a floor waxing machine for cash of $5,000.It has a 5 year life with no salvage value,and the city uses straight-line depreciation on their assets.
3.The cleaning services department billed other government agencies and departments $226,000 and collected $187,000.
4.The cleaning services department incurred and paid the following expenses: cleaning personnel wages,$65,000;payroll taxes,$10,000;cleaning supplies,$13,000;and office rental and utilities,$77,000.The cleaning services department also repaid the general fund for the loan.
5.The cleaning services department prepared the journal entry to depreciate their assets for the year ending December 31,2011.
Required:
Prepare the necessary journal entries for each of the above transactions for the Internal Service Fund.

Question 29

Prepare journal entries to record the following grant-related transactions of the municipal swimming pool,which is funded primarily by membership fees.
1.Received an operating grant in cash from the state for $200,000,to be used for life-saving and first-aid training.
2.Incurred and paid qualifying expenses on the state grant program by providing training,$165,000.
3.Received a federal grant to finance purchase of an energy efficient heating system for the pool,$120,000 (cash received in advance).
4.New heating system installed and paid,$115,000.

Question 30

The four cash flow categories required in an Enterprise Fund's Statement of Cash Flows are listed below and assigned a letter code.

A)Cash flows from operating activities
B)Cash flows from noncapital financing activities
C)Cash flows from capital and related financing activities
D)Cash flows from investing activities
Required:
Use the correct letter code to indicate where each of the following ten items associated with an Enterprise Fund should be reported in the Statement of Cash Flows.
1.An enterprise fund's fixed asset was sold for cash.
2.Cash paid to suppliers for goods.
3.Paid principal,$100,000,and interest,$5,000,on a mortgage.
4.Cash proceeds from sale of investments,$65,000.
5.Cash paid for new equipment,$18,000.
6.Cash received from the general fund;restricted to cover part of the cost of plant expansion,$900,000.
7.Cash received from another fund as a 6-month loan for the sole purpose of financing purchase of equipment,$47,000.
8.Cash proceeds from issuing bonds for an enterprise fund's construction project.
9.Cash paid to employees for salaries.
10.Cash received from interest earned on investments.

Question 31

Prepare journal entries in the motor pool department of Hill County to record each of the following transactions.
1.The General Fund contributed $50,000 cash to the motor pool department.The motor pool department purchased four vehicles on July 1,2011 by paying $50,000 down and borrowing $70,000 on a 5%,3-year note.
2.Billed General Fund departments $430,000 for services provided to those departments.Billings to the Enterprise Fund totaled $210,000.All billings were collected by year-end(June 30,2012)except for $80,000 charged to the General Fund.
3.Accrued year-end adjustments at June 30,2012 for interest expense and depreciation.The useful life of the equipment is 5 years with no salvage value.

Question 32

A trust fund was created to assist local students in financial need.The following transactions occurred in the trust.
1.The committee forming the fund was able to raise $700,000 and invested the funds so that the principal would remain indefinitely,and the earnings would be used to aid needy students.
2.During the year,the fund earned $65,000 interest.Earnings remain invested in the trust until withdrawn to distribute,so the interest was invested.
3.$50,000 of the investments were sold,withdrawn,and distributed to provide scholarships.
4.The fund-raising committee contributed an additional $200,000 cash to the fund.This cash was deposited into the account and invested.
5.Interest earned but not yet deposited into the investment account was accrued at $17,000.
Required:
Prepare the necessary journal entries for each of the above transactions for the trust fund.

Question 33

The City's municipal golf course had the following transactions.
1.Received a beautification(operating)grant from the state for $600,000.Received cash of $600,000.
2.Incurred and paid qualifying expenses under the state grant program in (1)above of $280,000.
3.Incurred and paid construction costs on an uncompleted clubhouse for $1,200,000.
4.Received $1,000,000 cash from a grant to assist with construction costs for the clubhouse.
Required:
Given that the golf course is operated based on user fees for upkeep,prepare the necessary journal entries for each of these transactions.

Question 34

The following transactions relate to a municipal golf course and tennis club,financed with debt secured by membership fees.
1.The General Fund loaned $25,000,000 cash to the Enterprise Fund.The note is not interest-bearing.
2.The municipal golf course and tennis club purchased land and constructed the facilities which totaled expenditures of $23,700,000.
3.Bonds were issued by the municipal golf course and tennis club for $20,000,000,par value of the bonds.
4.Membership fees were billed in the amount of $4,800,000.$4,200,000 was collected.
5.$5,000,000 was repaid to the general fund,with the anticipation of repaying $5,000,000 more per year for the next four years.
Required:
Prepare the necessary journal entries for each of the above transactions for the Enterprise Fund.

Question 35

Journalize the following utility transactions in the Hazzard County Enterprise Fund:
1.The utility sold $4,000,000 of 6.5% revenue bonds at 98 on July 1,2011 (an interest payment date).The bond proceeds are to be used for new plant construction and the issue will mature in 20 years.Interest is paid semi-annually on July 1 and January 1.
2.Depreciation for the year-ended December 31,2011 included $300,000 for buildings and $190,000 for equipment.
3.The utility paid $600,000 in construction costs for the new plant.
The plant is still under construction.
4.Interest on the revenue bonds was accrued at year-end,December 31,2011.Straight-line amortization is used for bond discounts and premiums.

Question 36

Prepare journal entries to record the following grant-related transactions of an Enterprise Fund.
1.Received an operating grant in cash from the state,$2,500,000.
2.Incurred and paid qualifying operating expenses on the state grant program,$1,600,000.
3.Received a federal grant to finance construction of a plant,$4,500,000 (cash received in advance).
4.Incurred and paid construction costs on the plant,$3,000,000.The plant is not completed.

Question 37

Based upon the cash flow information provided below for the year ended December 31,2011,prepare a cash flow statement for the Bloomfield Municipal Golf Course,an enterprise fund.

Question 38

Prepare journal entries in an Internal Service Fund of Union County to record each of the following transactions.
1.Purchased equipment on September 1,2011 by paying $25,000 down and borrowing $100,000 on a 6%,2-year note.
2.In 2011,billed General Fund $620,000 for services provided.Billings to the Enterprise Fund totaled $165,000.All billings were collected by December 31,2011 except for $100,000 charged to the General Fund.
3.Accrued year-end adjustments at December 31,2011 for interest expense and depreciation.The useful life of the equipment is 5 years with no salvage value.

Question 39

Static City started a department to provide copy,printing and mailing services for all departments and agencies of the city.
During the fiscal year from July 1,2010 through June 30,2011,the copy services department had the following transactions:
1.Paper and toner inventory was purchased for $58,000,on account.
2.The paper and toner inventory physical count showed only $8,000 on hand at June 30,2011.
3.The department billed other departments for services rendered to them amounting to: General Fund,$43,000;Enterprise Fund,$24,000;Debt Service Fund,$21,000;and Trust Fund,$16,000.All receivables were collected with the exception of $6,000 from the Trust Fund which is expected to be collected in July,2011.
4.The department incurred and paid the following expenses: salaries and wages,$23,000;Electric,$8,000;Other operating expenses,$6,000.Also,$63,000 of the Accounts Payable were paid during the year.
5.Depreciation Expense on Equipment amounted to $6,000 for the year ending June 30,2011.
6.The department prepared the closing entry on June 30,2011.
Required:
For the fiscal year ended June 30,2011,prepare the journal entries to record the transactions for the Internal Service Fund.