Question 1

Internal Service Funds may report each of the following net position classifications except

Accepted Answer

A)  Net investment in capital assets. 
B)  Restricted net position. 
C)  Nonspendable net position. 
D)  Unrestricted net position.

Question 2

A self-insurance Internal Service Fund may $\textbf{    not  }$ include which of the following in its charges to other funds?

Accepted Answer

A)  A reasonable provision for profit over a period of time. 
B)  Charges based on actuarial or other acceptable estimates of costs. 
C)  A reasonable provision for expected future catastrophic losses. 
D)  An amount equal to current year costs.

Question 3

The Central Warehouse Internal Service Fund purchased $15,000 of inventory on account, which was unpaid as of the month end. Which of the following statements regarding the accounting for the transaction is false?

Accepted Answer

A)  Expenses in the Internal Service Fund will increase. 
B)  Capital assets recorded in the Internal Service Fund remain unchanged. 
C)  The transaction will increase total assets. 
D)  The transaction will increase total liabilities.

Question 4

Transfers from an Internal Service fund to another fund are reported in the Internal Service Fund's Statement of Cash Flows as

Accepted Answer

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 5

An Internal Service Fund is considered to be

Accepted Answer

A)  A governmental fund. 
B)  A proprietary fund. 
C)  A fiduciary fund. 
D)  Either a governmental fund or a proprietary fund, depending on the nature of the activity accounted for within the fund.

Question 6

Caraway County has a Self-Insurance Internal Service Fund. If the fund purchases $100,000 of investments during the month, the

Accepted Answer

A)  Fund's total assets will increase by $100,000. 
B)  Fund's total assets will decrease by $100,000. 
C)  Fund's total assets will remain the same. 
D)  Fund's expenditures will increase by $100,000.

Question 7

Nathan Township's General Fund transfers three vehicles to the Internal Service Fund. The vehicles, which have a useful life of five years, are transferred at the end of their fourth year. The original cost for all three vehicles totaled $75,000. The entry in the Internal Service Fund would be $\begin{array}{llr}
&&\text { Debit }&\text {Credit }\
\text {  A.} &  \text { Vehicles. } &\$75,000\
 &\text {  Accumulated Depreciation - Vehicles} &&\$60,000\
 &\text { Net Investment in Capital Assets } &&15,000\
 \
\text {B.  } &  \text { Vehicles. } &\$75,000\
 &\text {Accumulated Depreciation - Vehicles  } &&\$60,000\
 &\text {Capital Contributions  } &&15,000\
 \
\text { C. } &  \text {  Vehicles.} &\$15,000\
 &\text {Capital Contributions  } &&\$15,000\
 \
\text { D. } &  \text { Vehicles. } &\$75,000\
 &\text {  Accumulated Depreciation - Vehicles} &&\$60,000\
 &\text {  Transfer from General Fund} &&15,000\
\end{array}$

Accepted Answer

The answer of Nathan Township's General Fund transfers three vehicles...

Question 8

According to GAAP, Only City's Transportation Services Internal Service Fund must present which financial statements? 
I. A Statement of Net Position
II. A Statement of Revenues, Expenditures, and Changes in Fund Net Position
III. A Statement of Revenues, Expenses, and Changes in Fund Net Position
IV. A Statement of Cash Flows

Accepted Answer

A)  I and II only. 
B)  I and III only. 
C)  I, II, and IV only. 
D)  I, III, and IV only.

Question 9

A Motor Pool Internal Service Fund purchased ten new vehicles for their fleet inventory. The fund entered into a capital lease. The capitalizable cost totaled $300,000 and there was a $50,000 down payment. The entry to record the transaction in the Internal Service Fund would be $\begin{array}{llr}
&&\text { Debit }&\text {Credit }\
 \text {  A.} & \text {Vehicles.  } &\$300,000\
& \text { Expenditures. } &50,000\
& \text { Other Financing Source - Capital Lease } &&\$300,000\
& \text { Cash } &&50,000\
\
 \text { B. } & \text { Vehicles. } &\$300,000\
& \text { Other Financing Source - Capital Lease } &&\$250,000\
& \text {  Cash} &&50,000\
\
 \text { C. } & \text { Vehicles. } &\$300,000\
& \text { Capital Lease Payable } &&\$250,000\
& \text {  Cash} &&50,000\ 
\
 \text { D. } & \text {Vehicles.  } &\$250,000\
& \text { Expenditures. } &50,000\
& \text {Capital Lease Payable  } &&\$250,000\
& \text { Cash } &&50,000\
\end{array}$

Accepted Answer

The answer of A Motor Pool Internal Service Fund purchased...

Question 10

Inventory in an Internal Service Fund would most likely be reflected in which of the following net position classifications?

Accepted Answer

A)  Nonspendable net position. 
B)  Net investment in capital assets. 
C)  Restricted net position. 
D)  Unrestricted net position.

Question 11

Interest revenue earned by an Internal Service Fund will be reported on the statement of revenues, expenses, and changes in net position as

Accepted Answer

A)  Operating revenue. 
B)  Nonoperating revenue. 
C)  An other financing source. 
D)  A capital contribution.

Question 12

Match between columns
                        Premises:      Purchase of an Internal Service Fund capital asset for cash.
     Providing services to other funds on a cash basis.
     Issuing refunding bonds to refinance bonds issued 10 years ago to provide financing for capital asset acquisitions.
     Sale of Internal Service Fund capital assets for cash.
     Transfer from a Special Revenue Fund for the specific purpose of financing an Internal Service Fund capital asset purchase.
     Payment of office workers' salaries.
     Amortization of the Deferred Interest Expense Adjustment created when the capital asset debt was refunded.
     Transfer to a Capital Projects Fund to provide financing for a general government capital asset construction project.
     Purchases of investments with cash received from issuing bonds to finance construction of Internal Service Fund capital assets.
  Transfer to the General Fund for the purpose of financing specific operating costs of a department accounted for in that fund.
  Issuing bonds to provide operating cash for the Internal Service Fund.
  Signing a capital lease for equipment to be used by activities accounted for in the Internal Service Fund.
  Interest received during the year earned on investments.
  Transfer the proceeds from the sale of an Internal Service Fund capital asset to the General Fund.
  Depreciation on Internal Service Fund capital assets.
  Proceeds of bonds issued to finance construction of Internal Service Fund capital assets.
  Interest paid on bonds issued to finance construction of an Internal Service Fund capital asset.
  Principal retirement payments on bonds issued to finance construction of Internal Service Fund capital assets
  Unrealized gain on investments held at year end.
  Receipt of a capital grant for an ongoing Internal Service Fund capital asset construction project.

Accepted Answer

The Answer of Operating Activities and Noncapital Financing Activities and is...

Question 13

Five sections for reporting items in an Internal Service Fund Statement of Cash Flows prepared using the direct method (excluding the reconciliation of operating income to cash flows from operations) are:
A. Operating Activities
B. Noncapital Financing Activities
C. Capital and Related Financing Activities
D. Investing Activities
E. Noncash Financing and Investing Activities
Using these five sections, indicate in which section each of the following Internal Service Fund transactions should be reported. If a transaction should not be reported on the Statement of Cash Flows, indicate it using the letter "X".
1. Purchase of an Internal Service Fund capital asset for cash.
2. Providing services to other funds on a cash basis.
3. Issuing refunding bonds to refinance bonds issued 10 years ago to provide financing for capital asset acquisitions.
4. Sale of Internal Service Fund capital assets for cash.
5. Transfer from a Special Revenue Fund for the specific purpose of financing an Internal Service Fund capital asset purchase.
6. Payment of office workers' salaries.
7. Amortization of the Deferred Interest Expense Adjustment created when the capital asset debt was refunded.
8. Transfer to a Capital Projects Fund to provide financing for a general government capital asset construction project.
9. Purchases of investments with cash received from issuing bonds to finance construction of Internal Service Fund capital assets.
10. Transfer to the General Fund for the purpose of financing specific operating costs of a department accounted for in that fund.
11. Issuing bonds to provide operating cash for the Internal Service Fund.
12. Signing a capital lease for equipment to be used by activities accounted for in the Internal Service Fund.
13. Interest received during the year earned on investments.
14. Transfer the proceeds from the sale of an Internal Service Fund capital asset to the General Fund.
15. Depreciation on Internal Service Fund capital assets.
16. Proceeds of bonds issued to finance construction of Internal Service Fund capital assets.
17. Interest paid on bonds issued to finance construction of an Internal Service Fund capital asset.
18. Principal retirement payments on bonds issued to finance construction of Internal Service Fund capital assets
19. Unrealized gain on investments held at year end.
20. Receipt of a capital grant for an ongoing Internal Service Fund capital asset construction project.

Accepted Answer

The answer of Five sections for reporting items in an...

Question 14

An Internal Service Fund billed other departments $1,200,000 for services provided during the year. Expenses of $700,000 for salaries, $250,000 for supplies and materials used, $100,000 for depreciation, and $100,000 for interest expenses were incurred. The fund received a $42,000 transfer from the General Fund during the year. The Internal Service Fund should report operating income for the year of

Accepted Answer

A)  $50,000. 
B)  $92,000. 
C)  $150,000. 
D)  $192,000.

Question 15

The use of an Internal Service Fund is mandated by generally accepted accounting principles for which of the following activities?

Accepted Answer

A)  Risk financing activities. 
B)  Government motor pool. 
C)  Centralized warehouse. 
D)  GAAP does not require the use of an Internal Service Fund.

Question 16

The accounts listed below are taken from an Internal Service Fund adjusted trial balance (all amounts are in thousands):
   Requirements: Prepare Statement of Fund Net Position and Statement of Revenues, Expenses, and Changes in Fund Net Position for the year ended June 30, 20X3, for the City of Bell Buckle.

Accepted Answer

The answer of The accounts listed below are taken from...

Question 17

An Internal Service Fund had investments with an original cost of $100,000. As of the end of the fiscal year, the fair market value on these investments was $85,000. The Internal Service Fund would

Accepted Answer

A)  Report expenses of $15,000. 
B)  Report a reduction of revenue of $15,000. 
C)  Not adjust the value of the investments reported on the balance sheet. 
D)  Report a loss on investments of $15,000.

Question 18

The General Fund paid $4,000 to the Internal Service Fund for services rendered. Which of the following statements accurately reflects the reporting effects of the transaction?

Accepted Answer

A)  The Internal Service Fund will report revenues of $4,000. 
B)  The Internal Service Fund will report capital contributions of $4,000. 
C)  The Internal Service will report a transfer in of $4,000. 
D)  The Internal Service Fund will record a direct adjustment to unrestricted net position.

Question 19

The General Fund contributes $40,000 to an Internal Service Fund to subsidize the purchase of a capital asset. The contribution is not considered to be an interfund loan. The Internal Service Fund will report this contribution as a

Accepted Answer

A)  Transfer in. 
B)  Capital contribution. 
C)  Nonoperating revenue. 
D)  Direct equity adjustment to restricted net position.

Question 20

The General Fund contributes $40,000 to an Internal Service Fund to subsidize its operations. The contribution is not considered to be an interfund loan. The Internal Service Fund will report this contribution as a

Accepted Answer