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Which of the following would not be considered a government or nonprofit organization?

A software company that sells software exclusively to state and local
governments

The governmental GAAP hierarchy was established by

The Governmental Accounting Standards Board (GASB).

The primary users of external financial reports, as identified by the GASB, include all of the
following except

A. Investors and creditors.
B. Citizens.
C. Governing boards.
D. All of the above are considered to be primary users of external financial
reports.

Which of the following activities would most likely be accounted for in a nonexpendable
(proprietary) fund?

A. Water operations

Expenditures in a governmental (expendable) fund would potentially include

A. Salaries and wages.
B. Capital outlay.
C. Long-term debt principal retirement.
D. Long-term debt interest.
E. All of the above.

What best describes the relationship of the FASB and the GASB?

They are co-equal bodies with different areas of responsibility for
standards setting.

Which of the following is a government?

A. A school district
B. Library commission if governments appointed a voting majority of its
governing board.
C. Neither would ever be a government.

Expenses and expenditures are least likely to differ in amount for which type of transactions

Salaries

Which of the following is not a characteristic of a fund?

Separate legal entity

All not-for-profit organizations that do not meet the definition of governments must apply

FASB standards

Fixed-dollar budgets and appropriations are most often found in

D. Expendable funds.

If a government is obligated legally to report information in a manner that differs from GAAP

Both GAAP requirements and legal requirements must be met.

Which of the following is not a characteristic used to determine if an organization is a government?

An entity receives over half of its resources from other governmental
entities.

The primary users of government financial reports do not include

A. Legislative and oversight bodies.
B. Government administrators.
C. Investors and creditors.
D. The citizenry.
E. All of the above have been identified as primary users.

A government accounting system must make it possible to

A. Present financial information in conformity with GAAP.
B. Demonstrate compliance with finance related legal and contractual
provisions.
D. Both A and B.

General purpose external financial reports for state and local government entities must include

A. Government-wide financial statements.
B. Management's discussion and analysis.
C. Fund financial statement.
D. All of the above should be included in general purpose external financial
reports.

The operation of a municipality's recreation facilities and sites such as ball fields, gymnasiums, and
tracks are most likely to be accounted for in a

C. General Fund.

Assume that the city of Wakefield purchased a tract of land to be used as a public park. The
purchase was financed with proceeds from a five-year note issued by a local lending institution. The
park itself will not be ready for public use, however, for at least two years. At the date of purchase,
the city would most likely account for the transaction in

B. The General Fund, the General Capital Assets account, and the General
Long-Term Liabilities account.

Which of the following scenarios regarding the fund type reporting practices for the city of Leesville
would be allowed by GAAP?

C. One General Fund, one Special Revenue Fund, one Debt Service Fund,
three Enterprise Funds, one Investment Trust Fund, and two Pension
Trust Funds.

The police department of the city of Newport purchased 10 new patrol cars at the beginning of the
new budget year at a total cash price of $250,000. This purchase will

B. Have no effect on capital assets in the General Fund, but will decrease
fund balance in the General Fund by $250,000.

The City of Ruth owns and operates an electric utility. The utility purchases new electric
transmission lines for $6,000,000 so that it can provide electricity to new customers. This purchase
will most likely

C. Increase capital assets reported in the Enterprise Fund by $6,000,000.

A municipality operates a local landfill. How could the landfill facility's operations be reported in the
municipality's financial statements?

B. Either in the General Fund or an Enterprise Fund

Which of the following is considered a proprietary fund?

C. Internal Service Fund

Which of the following accounts is not included in a balance sheet of a governmental fund?

B. Equipment

A city levies a special property tax that is legally restricted to pay off the principal and interest on
bonds issued to build the city's new police headquarters. Which fund should be used to account for
the proceeds from the tax levy?

B. Debt Service Fund

Which of the following uses the flow of current financial resources measurement focus?
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A. Special Revenue Fund

A government can only have one

C. General Fund

All of the following transactions decreases the fund balance of a governmental fund except

C. Retirement of the principal of a short-term note.

statement of revenues, expenditures, and changes in fund balance is required for each

D. Special Revenue Fund

Which of the following would not be considered a fund financial statement?

C. Statement of activities

The General Fund

A. Is established at inception of a government and exists throughout its
life.
B. Is used by all governments that report governmental fund activities.
C. Is used to account for all financial resources that are not required to be
accounted for in another fund.
D. All of the above.

A Special Revenue Fund

D. Is used to account for resources that are restricted or committed to
expenditures for specific purposes other than debt service or capital
outlay.

Each of the following transactions would decrease fund balance in the General Fund except

B. Depreciation

A new computer, which had been estimated to cost $28,000, was received. The actual cost of the
computer was $29,400. To record this in the special revenue fund,

B. Expenditures should be debited for $29,400

Assume the General Fund borrows $50,000 from the Enterprise Fund. The interfund loan is
scheduled to be paid back in five years. Which of the following statements properly characterize the
reporting effects of this transaction on the General Fund?

A. The transaction will have no effect on General Fund fund balance.
C. The interfund loan, though long-term, should be reported as a General
Fund liability.
D. Both items A and C.

A local school district issued a short-term note payable to purchase $500,000 of recreation
equipment. The note will be repaid with General Fund resources. The General Fund would report

A. Expenditures of $500,000
C. A note payable of $500,000.
D. Both items A and C.

Which of the following should not be accrued as expenditures in a governmental fund at year end?

C. Interest incurred on long-term debt, but not yet due.

The General Fund had the following transactions during the month of June:
• Took delivery of 10 new patrol cars that had been ordered and encumbered the previous month -
total costs $270,000
• Issued purchase orders totaling $25,000 for various supplies
• Issued payroll checks in the amount of $110,000
• Various other short term liabilities were incurred in the amount of $1,500
Expenditures in the General Fund for the month of June would be

A. $381,500.

Which of the following events could potentially qualify for reporting as an extraordinary item

B. City Hall is hit by lightening and is significantly damaged by fire.

The city of Trixie reports in their General Fund a $505,000 special item (a gain) and a $1,750,000
extraordinary loss in the same year. Which of the following statements would be false?

C. Fund balance would increase by only $505,000.
D. Items C and D are both false.

The following information pertains to the Richardson County General Fund:
Expenditures $12,800,000
Revenues $9,200,000
Long-term note issue proceeds $1,000,000
Short-term note principal retirements $250,000
Operating transfers to other funds $75,000
The change in Richardson County's General Fund fund balance for the year is

C. A $2,675,000 decrease

Which of the following would be classified as Other Financing Sources (Uses)?

A. Transfers from an Internal Service Fund

For a transaction to be classified as a special item it must be

B. Unusual in nature or infrequent in occurrence.
C. Under the control of management.
D. Both items B and C.

Expenditures may be classified for accounting purposes by

A. Organizational unit.
B. Function
C. Activity.
D. All of the above

A school district receives a federal grant of $200,000 that is restricted to support a program
designed to teach elementary school students a foreign language. The grant pays for only about five
percent of the program costs. The remaining funds for the program come from the general resources
of the government. The program is accounted for in one fund. Which of the following funds could be
used for this activity?

C. General Fund

A city's General Fund general ledger includes accounts called Estimated Revenues, Appropriations,
and Encumbrances. This indicates that the city

D. Formally integrates its budget into its accounts.

D. Formally integrates its budget into its accounts.

C. Appropriations.

The purpose of encumbrance accounting is to

C. Avoid expenditures exceeding appropriations.

The "Unencumbered Balance" in an expenditure subsidiary ledger represents

A. Appropriation less expenditures and encumbrances

A. Appropriation less expenditures and encumbrances

D. $0

The town of Red Herring issued $60,000 of purchase orders. Assume that when all orders were
received, the actual cost was $59,000. How much would be recorded as expenditures when the
goods are received?

C. $59,000

Which of the statements regarding the accounting for encumbrances is false?

C. The budgetary entry to record an encumbrance would be a CREDIT to
Encumbrances and a DEBIT to Reserve for Encumbrances.

The following information pertains to the Scott County General Fund:
Appropriations $15,000,000
Estimated Revenues $14,000,000
Expenditures $14,800,000
Revenues $14,200,000
The change in Scott County's General Fund fund balance for the year is

D. A $600,000 decrease

A governmental fund budgetary comparison statement or schedule

A. May be presented in the same format as the GAAP operating statement.
C. May be presented in the format of the legally adopted budget, even if the
format is a non-GAAP format.
C. May be presented in the format of the legally adopted budget, even if the
format is a non-GAAP format.

Common functional categories of expenditures in governmental funds include all of the following
except

C. Utilities.

The budgetary comparison statement for a General Fund is required to include

A. A column for the amended budget appropriation.
B. A column for the original budget appropriation.
C. A column for actual expenditures on the budgetary basis.
F. Items A, B, and C only.

Which of the following scenarios would represent differences between the budgetary basis of
accounting and the GAAP basis of accounting?

A. Outstanding encumbrances are considered expenditures.
B. The General Fund budgets on a cash basis.
C. Transfers from other funds are inflows of budgeting resources but are not
revenues for financial reporting purposes.
D. All of the above.

As part of a government's basic financial statements and required supplementary information, a
budgetary comparison schedule is required for which funds?

C. General Fund and each annually budgeted major Special Revenue Fund

A budgetary comparison schedule includes the following columns except

C. Actual on the GAAP basis.

A general budget is often a term used to describe a budget for all of the following except

C. An Internal Service Fund.
D. An Enterprise Fund.
E. Both items C and D.

Under the modified accrual basis, revenues are considered susceptible to accrual if

D. Both available to finance current period expenditures and objectively
measurable.

Under the modified accrual basis, revenues are considered available to finance current period
expenditures if

A. Legally available to finance current period expenditures
C. Collected in the current period or soon enough thereafter to be used to
pay liabilities of the current period.
E. Both items A and C.

The availability criterion for governmental fund revenue recognition applies to governmental fund

A. Intergovernmental revenues.
B. Charges for services.
C. Interest and penalties on taxes.
D. Property tax revenues.
E. All of the above.

Which of the following statements regarding tax revenue recognition in the General Fund is false

C. Tax revenues are generally recorded at gross amounts of the levy,
regardless of expected collections.

A government levies property taxes and awards discounts for timely payment. How should the
government report discounts that it expects will be taken?

D. Deduct from the amount of taxes levied to determine property tax
revenues.

Which of the following governmental fund revenue sources are typically recorded as revenues only
as they are actually received in cash?

C. Building permit fees

C. Building permit fees

C. A debit to cash and a credit to deferred revenue.

Assume the following transactions occurred in a school district General Fund during the year:
• Charges for services collected - $25,000
• Taxes levied - $2,450,000
• Taxes collected from current year levy and prior year tax levies - $2,320,000
• Tax prepayments received - $10,000
• Grants earned and received during the year - $300,000
• Grants awarded but not yet available - $250,000
The amount of revenues recorded in the General Fund for the year would b

Assume the following transactions occurred in a school district General Fund during the year:
• Charges for services collected - $25,000
• Taxes levied - $2,450,000
• Taxes collected from current year levy and prior year tax levies - $2,320,000
• Tax prepayments received - $10,000
• Grants earned and received during the year - $300,000
• Grants awarded but not yet available - $250,000
The amount of revenues recorded in the General Fund for the year would b

The county received a $1,500,000 restricted grant from the state government to be used to improve
its public safety department's communication systems. The county will not meet all eligibility
requirements of the grant until next fiscal year, when the county plans to begin incurring
expenditures for this purpose. In the current year, the General Fund should report this grant as

A. Deferred revenues

The city of Ruth has been awarded a $1,000,000 federal expenditure-driven grant to improve bike
trails. The federal government advanced the city $600,000 when the grant was awarded on January
10, 20X8. The city incurred $418,000 of qualifying expenditures during 20X8. How much should the
city of Ruth recognize as deferred revenue for its fiscal year ending December 31, 20X8?

E. $182,000

Which of the following statements regarding the accounting for investments in governmental funds
is false?

B. Interest revenue should be recognized on a cash basis.

A government received $30,000 of interest on investments of its General Fund during the year. The
fair value of its investments increased by $3,500 during the year. In its General Fund statement of
revenues, expenditures, and changes in fund balance the government should report

B. Investment income of $33,500 as revenues.

All of the following are examples of intergovernmental revenues except

C. Interest earned on investments in bonds issued by other governments.

The county received a $75,000 payment in lieu of taxes from the water Enterprise Fund. The
Enterprise Fund receives no service from the county for this payment. The General Fund should
report the payment in

A. Other financing sources - transfer

If an expenditure was inadvertently charged to the General Fund instead of the appropriate Special
Revenue Fund, what effect would the correction of this error later in the same fiscal year have on
the General Fund?

D. Expenditures would be decreased

The following benefits are examples of other postemployment benefits (OPEB) except for

B. Pension benefits

Which of the following is not a typical governmental fund liability (and thus not an expenditure that
is recognized when the liability is incurred)?

C. Debt service

Which of the following governmental fund expenditures would not be considered a current operating
expenditure?

E. Capital outlay

The General Fund borrowed $10,000 on a six-month note, with 5.0% interest, on April 1. As of the
June 30 fiscal year end, the General Fund would report accrued interest payable in the amount of

C. $125.

A city government purchased a new fire truck in Year 1 for $270,000. The city incurred an additional
$30,000 in transportation and calibration costs to ready it for use. It has an estimated useful life of
20 years, though it is being financed over a 15 year period. The amount of depreciation that will be
reported each year in the General Fund will be

A. $0.

Assume that a government purchases $85,000 of inventory for the General Fund during the year.
The General Fund began the year with an inventory balance of $15,000 and ended the year with a
balance of $35,000. The General Fund uses the consumption method of inventory accounting and a
perpetual inventory system. The General Fund should report

B. Expenditures of $65,000 for the year.

As payments are being made for debt service payments related to a capital lease, a General Fund
will report

D. Expenditures for the full amount of the debt service payment.

Nathan Township financed emergency repairs on the Township Hall by borrowing on a $200,000, 6
month short-term note. The interest rate on the note was 6% and it was issued 2 months prior to
the end of the fiscal year. Which of the following statements accurately reflects how the General
Fund will be affected in the year the financing was acquired?

B. The General Fund will report a Note Payable of $200,000.
C. The General Fund will report interest expenditures of $2,000.
E. Both items B and C.

A court judgment was rendered against a county in which they were ordered to pay $500,000 in
equal installments over a five-year period to the plaintiff. The county's General Fund will

C. Report expenditures of $100,000 in Year 1.

A General Fund transfers funds to a Debt Service Fund in late December. The Debt Service Fund will
make the required debt service payment in early January. For the month of December, fund balance
will

D. Either item A or B, depending on the government's debt service
expenditure accounting policy.

A city entered into a general government capital lease for equipment on July 1, 20X7. The
capitalizable cost of the equipment was $400,000. A down payment of $40,000 was made. The next
lease payment of $100,000 is due July 1, 20X8. The implicit rate of interest on the lease agreement
is 10%. The amount of expenditures that the city should report in its General Fund statement of
revenues, expenditures, and changes in fund balance for the year ended December 31, 20X7

D. $400,000.

Assignment of budgeted expenditure authority to differing time periods within a year-such as
months or quarters-is a budgetary control mechanism referred to as

C. Allotments.

The minimum acceptable expenditure classifications for governmental fund financial reporting
purposes are

C. Program or function

The General Fund reported a beginning balance of inventory of materials and supplies of $122,000.
The ending balance was $150,000. Supplies purchased during the year totaled $600,000. The
county uses the consumption method. The General Fund should report expenditures for materials
and supplies for the year of

D. $572,000.

The General Fund reported a beginning balance of inventory of materials and supplies of $122,000.
The ending balance was $150,000. Supplies received during the year (purchases) totaled $600,000.
The county uses the purchases method. The General Fund should report expenditures for materials
and supplies for the year of

B. $600,000

Which of the following statements is true concerning accounting and financial reporting practices
related to capital asset acquisitions?

A. Routine capital purchases such as vehicles and equipment often may be
financed and accounted for in a General Fund.

A governmental entity is funding a capital project with the issuance of general obligation bonds, as
well as a federal grant. The grant would be reported on the operating statement as

C. A revenue.

Assume a Capital Projects Fund of County A is holding investments as of the end of the fiscal year.
Which of the following statements is true related to the interest earned on the investments?

C. County A would report accrued interest receivable and interest revenue
in the Capital Projects Fund as of the end of the fiscal year.

The General Fund is partially funding the construction of a new police station. 80% of the project is
being financed; the General Funds' share of the project is $1,000,000. The Capital Project Fund
would report the General funds' share as

A. A $1,000,000 other financing source.

If a governmental entity issued a six-month, $400,000 note payable at 6% interest three months
prior to the fiscal year end to help finance a new fire station, Capital Projects Fund interest payable
should be accrued as of the end of the fiscal year in the amount of

B. $6,000.

County A was awarded a $900,000 expenditure-driven grant in year 1 for a capital project that is
expected to take three years to complete. Project expenditures are financed by weekly cash draws
from a local bank. As of the end of Year 1 the county had incurred expenditures of approximately
$50,000. The county should recognize Capital Projects Fund revenue at the end of Year 1 in the
amount of

B. $50,000.

A Capital Project Fund received a $300,000 transfer from the General Fund and a $500,000 federal
grant for a highway project. The grant is being paid in two phases-$200,000 for Year 1 expenditures
and $300,000 when the project is completed (anticipated to be at the end of Year 2). Capital Project
Fund revenues reported at the end of Year 1 should be

B. $200,000.

Assume that a government received a $5,000,000 expenditure-driven grant in Year 1 for a project
that was expected to take three years to complete. Further assume that qualifying expenditures for
the project, which actually took four years to complete, were as follows: Year 1 - $1,000,000; Year
2 - $2,500,000; Year 3 - $1,000,000; Year 4 - $400,000. The government should report grant
revenues in Year 2 in the amount of

E. $2,500,000.

Which of the following statements is false?

D. Debt service payments on capital-related debt are paid from a Capital
Projects Fund.

Which of the following accounts would appear in a Capital Projects Fund?

B. Contracts payable-retained percentage

Which of the following accounts would not appear in a Capital Projects Fund?

C. Bonds payable

Which of the following should not be reported as other financing sources (uses) in a Capital Projects
Fund?

D. Payment of construction costs.

Which of the following should be reported as other financing sources (uses) in a Capital Projects
Fund?

A. Transfers.
B. Premium on general obligation bonds issued to finance a general
government capital project.
C. Discount on general obligation bonds issued to finance a general
government capital project.
D. All of the above.

Which of the following is true?

A. A Capital Projects Fund is not required unless a project is financed by
issuing bonds.
B. Acquisition or construction of general government capital assets must
always be accounted for through a Capital Projects Fund.
C. A government is required to record each major general government
capital project in a separate Capital Projects Fund.
D. None of the above is true.

The city's Capital Projects Fund had an excess of expenditures over revenues for the current year.
Which of the following explanations for the excess is plausible?

A. The city financed a significant portion of the project by issuing
long-term bonds during the year
B. The city financed a substantial portion of the project in the previous
year.
C. The city financed a significant portion of the project from property taxes
transferred from the General Fund.
D. All of the above are plausible explanations.

Revenues in a Debt Service Fund are recognized when

A. They are measurable and available.

Equity in a Debt Service Fund is known as

B. Fund balance

In the year that a governmental entity enters into an advance refunding, which of the following note
disclosures would not be required?

In the year that a governmental entity enters into an advance refunding, which of the following note
disclosures would not be required?

What measurement focus does a Debt Service Fund use?

B. Current financial resources

All of the following statements regarding a Debt Service Fund are true except

A. A Debt Service Fund is rarely used to account for all of a governmental
entity's general obligation bond repayments.

Which of the following would not be a potential financial resource for a Debt Service Fund?

A. Sales tax
B. Property taxes
C. Transfers from the General Fund
D. Proceeds of refunding debt
E. All of the above represent potential financial resources for a Debt
Service Fund.

If cash from the General Fund is transferred to a Debt Service Fund, the entry in the Debt Service
Fund would

C. DEBIT cash and CREDIT other financing sources.

Which of the following transactions would not be reported as expenditures in a Debt Service

A. Issuance costs incurred in a refunding bond issuance
B. Payments to escrow agents with resources from the General Fund
C. Arbitrage rebate
D. All of the above would potentially be reported as expenditures in a Debt
Service Fund.

Which of the following statements regarding external financial reporting for a Debt Service Fund is
false?

D. A statement of cash flows is required.

A government is required to use a Debt Service Fund in which of the following cases?

C. When financial resources are being accumulated for long-term general
government principal and interest maturing in future years

A government has $3,000,000 of 6%, 10-year general obligation bonds outstanding. The bonds
were issued on July 2, 20X7 to finance construction of a general capital asset. Interest is payable
semiannually on January 1 and July 1. What is the minimum amount of interest expenditures that the government would be permitted to report on the bonds for 20X7?

A. $0

A government has $3,000,000 of 6%, 10-year general obligation bonds outstanding. The bonds
were issued on July 2, 20X7 to finance construction of a general capital asset. Interest is payable
semiannually on January 1 and July 1. What is the maximum amount of interest expenditures that
the government would be permitted to report on the bonds for 20X7?

A. $90,000

Principal and interest expenditures on general long-term debt should be recognized in the period

C. That they are legally due and payable.

Debt Service Fund expenditures commonly include

Debt Service Fund expenditures commonly include

A Debt Service Fund received a $100,000 payment from the General Fund to finance upcoming debt
service payments. During the year, Debt Service Fund payments of $50,000 interest and $60,000
principal were made as they become due. The Debt Service Fund statement of revenues,
expenditures, and changes in fund balance should report

C. An excess of expenditures over revenues of $110,000

The parks and recreation department, which is accounted for within the General Fund, purchased a
new athletic field mower at a cost of $25,000. The mower has an estimated useful life of 5 years.
The General Fund would report depreciation expense at the end of Year 2 in the amount of

C. $0.

Which of the following methods of capital asset valuation is not considered an acceptable alternative
under generally accepted accounting principles?

D. Each of the above methods is an acceptable alternative in accordance
with generally accepted accounting principles.

Which of the following comments best describes the accounting and financial reporting guidelines
for works of art and historical treasures?

B. Governments should capitalize works of art and historical treasures but
should not depreciate them unless they are considered exhaustible.

A general government department of a county government donated a capital asset with an original
cost of $40,000 and accumulated depreciation of $15,000 to one of the county's proprietary funds.
The proprietary fund would record the transaction as a

C. DEBIT to capital assets of $25,000 and a CREDIT to capital contribution

A capital contribution could be reported in each of the following funds except a/an

C. General Fund.

Impairment valuations may be calculated using a variety of methods. Which of the following
impairment calculation methods is not in accordance with generally accepted accounting principles?

A. Cash replacement cost approach

Accumulated depreciation may be reported

D. In the government-wide and in the fund financial statements except for
the governmental funds.

Which of the following capital assets would not be considered a general capital asset?

B. Infrastructure associated with the local water system

A local citizen donated land with a fair market value of $500,000 to the county government. The
donor had paid $550,000 for the land five years ago. The county incurred $150,000 in development
costs to convert the land into a public park. The county would capitalize the new public park at

A. $650,000.

The village of Wisteria Lane purchased 10 new police cruisers on January 1 at a total cost of
$240,000. An additional $60,000 is being spent to paint the village's name and logo and vehicle
number on the vehicles and add necessary lighting and other equipment. The cruisers will have an
anticipated useful life of six years. As of the end of the first fiscal year (December 31), the
depreciation expense, using straight-line depreciation, in the government-wide statement of
activities should be

C. $50,000.

Assume that a governmental entity acquires a new garbage truck. The garbage truck costs
$189,000. The vendor allowed a $30,000 allowance with the trade-in of the entity's old garbage
truck, which had a net book value of $42,000. The government financed the balance with a
short-term bank note. The new garbage truck would be recorded in the General Capital Assets
account at

B. $189,000.

A local town received a donation of $300,000. The donor stipulated that the money be permanently
invested with the investment proceeds being used to provide funding for the town's recreation
programs. Which of the following best describes the reporting options for this transaction?

A. The town should record the $300,000 as a revenue in a Permanent Fund

Which of the following items would not be included in a government's General Capital Assets
accounts?

D. Internal Service Fund equipment

A government has the following general government capital assets:
Streets and roads-$17,000,000
Buildings-$20,000,000
Equipment-$4,000,000
Assets acquired under capital leases-$1,000,000
What is the minimum amount of general capital assets the government may report under GAAP?

B. $42 million

A government may elect not to report depreciation expense on which type of capital assets?

A. Infrastructure capital assets

An Enterprise Fund would potentially include all of the following liabilities on the face of the
statement of net assets except

A. Bonds payable.
B. Notes payable.
C. Claims and judgments.
D. Compensated absences.
E. All of the above could potentially be included on an Enterprise Fund's statement of net
assets.

Generally accepted accounting principles require an Enterprise Fund's statement of net assets to be
presented on

C. Either the net asset or balance sheet format.

A general government department donates a capital asset with an original cost of $50,000 to an
Enterprise Fund. The net book value as of the date of donation is $17,500. The entry that should be
recorded by the Enterprise Fund would be

A general government department donates a capital asset with an original cost of $50,000 to an
Enterprise Fund. The net book value as of the date of donation is $17,500. The entry that should be
recorded by the Enterprise Fund would be

A city Enterprise Fund received an operating grant during the fiscal year. The Enterprise Fund will
report this grant on the statement of revenues, expenses, and changes in net asset as

B. Non-operating revenues

The use of an Enterprise Fund is required by generally accepted accounting principles in each of the
following situations except

B. When user fees are charged for the majority of the enterprises' operations.

An Enterprise Fund incurs $35,000 in interest during the current year related to its outstanding
bonds. The $35,000 will be reported as

B. Non-operating expenses

The city, which has a December 31 year end, was awarded a $400,000 federal grant for a system
upgrade to meet FCC requirements. The grant was awarded and distributed to the fund in June
20X7. However, the capital project is not expected to be completed until June 20X8. As of December
31, 20X7, the Cable Enterprise Fund should

C. Report a capital contribution of $400,000

A city's Enterprise Fund issued revenue bonds with a face value of $10,000,000. The bonds were
issued with a 2% premium and the issuance costs totaled $150,000. When the bonds are issued, the
Enterprise Fund will report total other financing sources in the amount of

D. $0.

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

D. Total construction in progress (an asset) in Year 2 of $2,100,000.

An Enterprise Fund made a debt service payment of $75,000 ($45,000 principal, $30,000 interest).
The Enterprise Fund will report

D. $30,000 of expense.

The Public Utilities Enterprise Fund was ordered by the court to pay environmental damages of
$500,000. The fund is to pay $100,000 immediately and the remaining $400,000 in equal
installments for four additional years. In the year of the judgment, the Enterprise Fund would report

A. $500,000 in expenses.
B. $400,000 in liabilities.
D. Both items A and B.

Which of the following would be included in determining operating income of an Enterprise Fund?

B. Depreciation expense

A government borrowed $20 million by issuing general obligation bonds to finance construction of a
new airport terminal for its Airport Enterprise Fund. The bonds were issued at par, and the
government intends to service the bonds from Enterprise Fund revenues. The proceeds of the bonds
should be reported as

B. Capital and related financing activities in the Enterprise Fund statement of cash flows.

Payments in lieu of taxes that are not payments for services from a government's Enterprise Fund to
its General Fund should be reported by the Enterprise Fund as

A. Transfers out.

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