ACCTG508 Test Two

Bates City's municipal solid waste landfill (MSWLF) is accounted for as an enterprise fund. The estimated total closure and postclosure costs are $375,000. At the beginning of the current reporting period the landfill was estimated to be 40 percent filled and the MSWLF had recognized expenses totaling $150,000 (40 percent of $375,000). The city's sanitation engineers have estimated at the end of the current fiscal year that total closure and postclosure costs remain at $375,000 and the landfill is now 45 percent filled. The current year expense, referred to as provision for closure and postclosure costs, should be debited for: A) $18,750. B) $168,750. C) $225,000. D) Since the units of production are not provided the amount cannot be determined.

A) $18,750. (Feedback: Accounting for a MSWLF essentially follows the units of production method in that cumulative expenses recognized at the balance sheet date is the percentage of total capacity filled to date (which represents the units of production used) multiplied by the total estimated closure and postclosure costs, re-estimated each year. As of the end of the current fiscal year, the total amount that should have expensed, including that recognized in prior years, is .45 X $375,000 = $168,750. Since $150,000 had already been expensed in prior years, the current year expense is the difference or $18,750.)

Using the information from question 16, recall that Elm City reported the following information pertaining to its pensions for fiscal year 2014, based on GASB standards applicable to the employer. Net Pension Obligation (NPO), 1-1-14 (arising from prior contributions defiencies): $2,800,000 Annual Required Contribution (ARC): $6,000,000 Actual contribution for FY2014: $5,700,000 Discounted present value of NPO, 1-1-14: $152,000 The city's net pension obligation as of 12-31-14 is: A) $3,172,000. B) $3,100,000. C) $2,592,000. D) Some other amount.

A) $3,172,000. (Feedback: The solution to this question is to add the change in NPO (annual pension cost of $6,072,000 minus actual contribution of $5,700,000) to beginning of the year NPO ($2,800,000), obtaining $3,172,000.)

State and local governments can avoid reporting depreciation on infrastructure assets if they use the modified approach and meet which of the following two requirements? A) (1) Manage the eligible infrastructure assets using an asset management system that includes (a) an up-to-date inventory, (b) condition assessment and results using a measurement scale, and (c) estimates of the amount needed to maintain and preserve assets at the condition level established. (2) Document that the eligible assets are being preserved at or above the condition level established. B) (1) File a "Declaration of Intent to Follow the Modified Approach" with the GASB. (2) Agree in writing to maintain infrastructure assets at a high condition level. C) (1) Agree in writing to maintain infrastructure assets at a high condition level. (2) Document that the assets are, in fact, being maintained at the high condition level established. D) None of the above. A government cannot avoid reporting depreciation on infrastructure assets, even if it adopts the modified approach.

A) (1) Manage the eligible infrastructure assets using an asset management system that includes (a) an up-to-date inventory, (b) condition assessment and results using a measurement scale, and (c) estimates of the amount needed to maintain and preserve assets at the condition level established. (2) Document that the eligible assets are being preserved at or above the condition level established. (Feedback: These two statements paraphrase quite closely the two requirements printed on p. 176. Choices B and C may seem to make sense, but they are not correct, in part because GASB does not require that any particular condition level be established.)

Which of the following activities would likely be accounted for in a fiduciary fund? A) A retirement plan for city employees. B) The city provides debt service for special assessment bonds for which the city assumes secondary responsibility for repayment. C) An endowed contribution is received for which earnings will be used to help maintain the city's parks. D) All of the above; that is, all of the above activities would be accounted for in a fiduciary fund.

A) A retirement plan for city employees. (Feedback: Choice B describes an activity for which a debt service fund would be used. Choice C describes an activity for which the beneficiary is the city's own citizens via the parks and recreation program. Thus, it would be accounted for in a permanent fund—a governmental fund type.)

At the government-wide level, the amount reported as pension expense each year should be the same as the: A) Annual pension cost. B) Net pension obligation. C) Actual contribution made for the year. D) Annual required contribution.

A) Annual pension cost. (Feedback: Per the discussion on pp. 338-339, the pension expense for the year should be the same as the calculated annual pension cost.)

Which of the following accounts would be least likely to be found in the general ledger of a capital projects fund? A) Construction Work in Progress. B) Expenditures. C) Revenues. D) Encumbrances.

A) Construction Work in Progress. (Feedback: Construction Work in Progress is a capital asset account and therefore would not be appropriate for a governmental fund type such as a capital projects fund. Instead, Construction Work in Progress would be found in the general ledger for governmental activities at the government-wide level.)

Brisbane Township issued $1,000,000 of 6-month bond anticipation notes to facilitate the beginning of street construction while waiting to see if market conditions improved before issuing $10 million of bonds. Brisbane has a written agreement with an investment firm, Pitch Municipal Services, Inc., to refinance the $1,000,000 of bond anticipation notes with $1,000,000 of bonds when the $10 million of bonds are issued during the next few months. Recording the issuance of the bond anticipation notes will include a: A) Credit to Other Financing Sources—Proceeds of Bond Anticipation Notes in the capital projects fund journal. B) Credit to Bond Anticipation Notes Payable in the capital projects fund journal. C) Credit to Estimated Other Financing Sources—Proceeds of Bonds in the governmental activities journal at the government-wide level. D) None of the above.

A) Credit to Other Financing Sources—Proceeds of Bond Anticipation Notes in the capital projects fund journal. (Feedback: The fact situation described in this question indicates that the two criteria described on p. 193 in the text are met. Thus, the debt is reported as a long-term liability in the Governmental Activities column of the government-wide statement of net position and as an other financing source (Proceeds of Bond Anticipation Notes) in the capital projects fund. Accounting for the issuance of the bond anticipation notes would be as illustrated on p. 193.)

Which of the following budgetary accounts is least likely to be included in the general ledger of a debt service fund? A) Encumbrances. B) Appropriations. C) Estimated Revenues. D) Estimated Other Financing Sources.

A) Encumbrances. (Feedback: It is unlikely that a debt service fund would be used to account for the purchase of goods or for contracting for services. Thus, the use of an Encumbrances account is unlikely to be relevant. The other budgetary accounts listed are routinely used, however, as illustrated in Chapter 6.)

Which of the following accounts would least likely be found in the general ledger of an internal service fund? A) Expenditures. B) Cash. C) Billings to Departments. D) Accumulated Depreciation—Machinery and Equipment.

A) Expenditures. B) Cash. C) Billings to Departments. D) Accumulated Depreciation—Machinery and Equipment. (Feedback: Internal service funds use the accrual basis of accounting; therefore, expenses rather than expenditures would be recorded by an internal service fund. The other accounts listed are commonly used in internal service funds.)

Which of the following debt service fund accounts would not be closed at the end of each fiscal year? A) Fund Balance. B) Expenditures—Bond Interest. C) Revenues. D) Estimated Revenues.

A) Fund Balance. (Feedback: Fund Balance is a permanent balance sheet account and thus is not closed at year-end. The other accounts are all temporary accounts that are closed at year-end to Fund Balance or Budgetary Fund Balance.)

Regarding calculation and reporting of depreciation on capital assets, for which of the following capital assets would accumulated depreciation be reported on the government-wide statement of net position? A) General capital assets: yes, Enterprise fund capital assets: yes, Fiduciary fund capital assets: no B) General capital assets: yes, Enterprise fund capital assets: yes, Fiduciary fund capital assets: yes C) General capital assets: no, Enterprise fund capital assets: no, Fiduciary fund capital assets: no D) General capital assets: no, Enterprise fund capital assets: yes, Fiduciary fund capital assets: no

A) General capital assets: yes, Enterprise fund capital assets: yes, Fiduciary fund capital assets: no (Feedback: Depreciation is reported for all depreciable capital assets reported on the government-wide statement of net position, both those reported in the Governmental Activities column (i.e., general capital assets and most internal service fund capital assets) and those reported in the Business-type Activities column (i.e., enterprise fund capital assets). Fiduciary fund financial information is reported only in the fund financial statements, not in the government-wide financial statements.)

At the government-wide level, financial information for an internal service fund is: A) Generally reported in the Governmental Activities column. B) Generally reported in the Business-type Activities column. C) At management's discretion is reported in the Governmental Activities or Business-type Activities column. D) Generally reported in the Component Units column.

A) Generally reported in the Governmental Activities column. (Feedback: Financial information for most internal service funds is reported in the Governmental Activities column because the General Fund and other governmental fund departments are usually the predominant participants in the internal service fund. However, if an enterprise fund is the predominant or only participant in the internal service fund's transactions the financial information for the internal service fund should be reported in the Business-type Activities column of the government-wide financial statements.)

The city operates a Risk Management Pool, an internal service fund, for self-insurance purposes. The General Fund requests payment for costs incurred for the repair of damages done to a garage as a result of a storm. How would the General Fund's request be recognized at the fund level by the Risk Management Pool? A) It would debit an expense account and credit Cash. B) It would debit Interfund Transfer Out and credit Cash. C) It would debit Building and credit Cash. D) It would not record a transaction since the activity occurred between two funds of the same government.

A) It would debit an expense account and credit Cash. (Feedback: Choice B is incorrect since the payment represents the primary operating activity of the Risk Management Pool and as a result an operating expense of the fund. Choice C is incorrect since the garage is not an asset of the Risk Management Pool. Additionally, the problem indicates the damage resulted in a repair not an enhancement of the asset. The transaction is recorded at the fund level, making D incorrect.)

What is the term that represents the cost of a utility plant to the owner that first devotes the plant to public customers? A) Original cost. B) Historical cost. C) Sunk cost. D) Public cost. Feedback:

A) Original cost. (Feedback: The answer is original cost. This concept has relevance in regulatory accounting in that it requires subsequent owners to carry forward on their books the original cost and accumulated depreciation. Any excess of the purchase price over the prior owner's book value is debited to a special regulatory asset account called Utility Plant Acquisition Adjustment (see p. 287).)

Property owners in the City of Charleston pay property taxes that are earmarked, in part, to provide debt service for the outstanding debt of the city. Property owners in the city also provide debt service support for a share of the outstanding debt of Charles County and the Charleston Public School District, proportionate to the ratio of the assessed valuation of property located within the city to that of all taxable property in the county and the school district. The sum of the city's outstanding debt plus a proportionate share of the county and school district's debt is referred to as: A) Overlapping debt. B) Legal debt margin. C) Total direct debt. D) Total general obligation debt outstanding.

A) Overlapping debt. (Feedback: The information in this question describes the term overlapping debt. Many debt analysts consider overlapping debt to be a more realistic measure of the debt burden supported by a city's taxpayers than is the direct debt of the city.)

Which of the following is part of the required supplementary information (RSI) for pension funds? A) Schedule of employer contributions. B) Statement of changes in plan net position. C) Schedule of plan assets. D) Statement of sources and uses of funds—all pension funds.

A) Schedule of employer contributions. (Feedback: For RSI, the term "schedule" is usually used rather than statement, so you should have quickly eliminated B and D. Choice D is a fictitious statement. Choice C is a basic financial statement that has inappropriately been labeled a schedule. Choice B is also a basic financial statement. The schedule of employer contributions is one of the two RSI schedules.)

A capital projects fund will sometimes report a large excess of expenditures over revenues and other financing sources in its operating statement during the early stages of construction. The most likely reason is: A) Short-term debt has been used for interim financing. B) Poor management, resulting in large cost overruns. C) Insufficient planning. D) Inadequate financing.

A) Short-term debt has been used for interim financing. (Feedback:)If short-term financing is used to pay for early stages of the construction and such financing has not met the rollover debt criteria included in GASB Codification, Sec. B50.101 and GASBS 62, pars. 39-43 (see p. 193), then a liability will be reported in the capital projects fund for the short-term debt and an expenditure will be reported for spending the debt proceeds. This creates an interim situation where there are few assets and the liability is offset by a large fund deficit.

Which of the following financial statements would contain a column for a debt service fund that was determined to be a major fund? A) Statement of revenues, expenditures, and changes in fund balances—governmental funds. B) Statement of cash flows—proprietary funds. C) Statement of activities. D) Statement of revenues, expenses, and changes in fund net position—proprietary funds.

A) Statement of revenues, expenditures, and changes in fund balances—governmental funds. (Feedback: The statement of revenues, expenditures, and changes in fund balances—governmental funds is the only financial statement listed that is for a governmental fund. Thus, it is the only one that would be appropriate for reporting the financial information for a major debt service fund.)

A cash flow statement prepared under GASB standards differs from one prepared under FASB standards in which of the following ways? A) The GASB statement of cash flows has four categories of cash flows rather than three. B) The GASB statement of cash flows reports Cash and Cash Equivalents, not just Cash. C) The GASB statement of cash flows reports investments in the securities of other entities as cash flows from investing activities. D) All of the above.

A) The GASB statement of cash flows has four categories of cash flows rather than three. (Feedback: The GASB cash flow statement differs from the FASB cash flow statement in several ways, but the only one listed in this question is Choice A.)

In the basic financial statements of a government, financial information for a capital projects fund will be reported in a separate column if: A) The capital projects fund qualifies as a major fund. B) The capital project is still ongoing at the end of the fiscal year. C) Sufficient information has not been disclosed about the capital project in the notes to the financial statements. D) All of the above.

A) The capital projects fund qualifies as a major fund. (Feedback: Under the GASB reporting model, a governmental fund or enterprise fund has its own separate column in the governmental fund or proprietary fund basic financial statements only if the fund meets the criteria for or is designated by management as a major fund.)

An investment trust fund is used when: A) There are governments participating in the investment trust fund other than the government sponsoring the fund. B) The funds participating in the investment trust fund are part of the government sponsoring the fund. C) Bond covenants require that sinking funds of the sponsoring government be established. D) All of the above.

A) There are governments participating in the investment trust fund other than the government sponsoring the fund. (Feedback: An investment trust fund is needed when the participants are governments and organizations other than the sponsoring government.)

On June 1, 2013, the City of Columbus issued $5,000,000 of 5 percent tax-supported bonds. The bonds mature in 10 years and pay interest semiannually on June 1 and December 1, beginning on December 1, 2013. For the fiscal year ending December 31, 2013, the amount of interest expenditures to be recognized in the debt service fund is: A) $0 B) $125,000. C) $250,000. D) Unable to calculate since it is unknown whether bonds were issued at premium or face.

B) $125,000. (Feedback: This question focuses on the exception to the modified accrual rule applicable to debt service funds. Specifically, expenditures are normally not recorded until the period in which principal and/or interest is due. Only one interest payment of $125,000 is legally due during FY 2013, so that is the only expenditure that would be recognized.)

Which of the following would be part of the journal entries to be made at the inception of a lease if a government leases a computer for the Police Department, a General Fund department? A) A debit to Expenditures in the General Fund in an amount equal to the annual lease payment. B) A debit to Equipment in the governmental activities journal in an amount equal to the present value of the minimum lease payments or fair value of the asset, whichever is lower. C) A credit to Other Financing Sources—Capital Lease Agreements in the governmental activities journal in the amount equal to the present value of the minimum lease payments. D) All of the above.

B) A debit to Equipment in the governmental activities journal in an amount equal to the present value of the minimum lease payments or fair value of the asset, whichever is lower. (Feedback: Choice A is incorrect since the amount should be the present value of the minimum lease payments to be made over the life of the lease, not the annual lease payment. Choice C is incorrect since the credit at the government-wide level should be to the long-term liability account, Capital Lease Obligations Payable.)

If an Allowance for Funds Used During Construction (AFUDC) account is used, which of the following is true? A) AFUDC will always have a credit balance equal to the total amount of interest paid during the period on bonds payable. B) AFUDC may represent either actual interest on debt issued for construction or an imputed interest on the utility's own equity capital used to finance construction. C) AFUDC is reported as a contra-asset on the utility's balance sheet. D) All of the above are true statements.

B) AFUDC may represent either actual interest on debt issued for construction or an imputed interest on the utility's own equity capital used to finance construction. (Feedback: Industry practice in the utility industry encourages capitalization of interest during construction or capitalization of an imputed or equivalent amount of interest even if the utility uses its own money for construction. The amount so capitalized is credited to the account AFUDC, which is a contra-expense if actual interest is capitalized or is a nonoperating revenue if imputed interest is capitalized. Thus Choice B is the only correct response.)

Which of the following funds has no net position; that is, assets always equal liabilities? A) Private-purpose trust. B) Agency. C) Pension trust. D) Investment trust fund.

B) Agency. (Feedback: For agency funds, the assets always equal the fund's liabilities to private parties. Thus, an agency fund's net position is always zero.)

Which of the following is a correct statement concerning the evaluation of a pension trust fund? A) The actuarial value of the plan assets reported on the pension's schedule of funding progress equals the fair value of the plan assets reported on the pension's statement of plan assets. B) An employer contribution that consistently equals the annual required contribution is generally an indication that the pension plan is being sufficiently funded. C) A funded ratio (actuarial value of assets/actuarial accrued liability) of less than 100 percent indicates a financially troubled (unsound) pension plan. D) All of the above statements are correct.

B) An employer contribution that consistently equals the annual required contribution is generally an indication that the pension plan is being sufficiently funded. (Feedback: As indicated on p. 334, consistently funding the pension plan at the level of the annual required contribution, indicates a sound funding policy that should help ensure a sufficiently funded pension plan. Due to actuarial efforts to smooth short-term volatility, the actuarial value and fair value of plan assets are often not equal, making Choice A incorrect. Choice C is incorrect since one rule of thumb is that a funded ratio of 80 percent or greater indicates a financially sound pension plan (see p. 334).)

Which of the following is true regarding the statement of revenues, expenses, and changes in fund net position—proprietary funds? A) Enterprise and internal service funds identified as major funds are shown in separate columns. B) Capital contributions are shown after the nonoperating revenues/expenses section. C) Any special items are to be included as operating income and expenses. D) The statement must be divided into operating, nonoperating, and other revenues and expenses sections.

B) Capital contributions are shown after the nonoperating revenues/expenses section. (Feedback: Choice A is incorrect because internal service funds are never identified as major funds. Special items are to be shown after nonoperating activity, making Choice C incorrect. GASB requires that the statement show operating and nonoperating activity. There is no requirement related to "other revenues and expenses," making D an incorrect choice. As discussed on page 258, Choice B is correct because capital contributions are shown after nonoperating activity.)

Which of the following accounts will be debited in the capital projects fund journal when a contractor billing that was previously recorded is paid? A) Construction Expenditures. B) Contracts Payable. C) Construction Work in Progress. D) All of the above.

B) Contracts Payable (Feedback: When the billing was previously recorded, Construction Expenditures was debited and Contracts Payable was credited. When the billing is paid Contracts Payable, less any amount of retainage authorized under the contract, will be debited and Cash will be credited.)

Using the information from the preceding question (question 8) how would the Lincoln County Investment Trust Fund record the receipt of U.S. Treasury bonds transferred to it by the School District's debt service fund? (Recall that at the date of transfer the fair value of the bonds was $1,040,000 and the carrying value was $1,000,000.) A) Credit Additions—Deposits in Pooled Investments—Lincoln School District for $1,000,000. B) Credit Additions—Deposits in Pooled Investments—Lincoln School District for $1,040,000. C) Debit Investments—U.S. Treasury Bonds for $1,000,000. D) Both B and C are correct.

B) Credit Additions—Deposits in Pooled Investments—Lincoln School District for $1,040,000. (Feedback: The entry required here would be to debit Investments—U.S. Treasury Bonds for $1,040,000 and credit Additions—Deposits in Pooled Investments—Lincoln School District for $1,040,000.)

Culver City issued $1,000,000 of special assessment bonds. The city has warranted to bondholders that it will make interest and principal payments should taxpayers in the special assessment district default on the debt. To make debt service payments on this debt, the City will require taxpayers in the special assessment district to pay $100,000 per year for 10 years, plus 5 percent interest on unpaid installments. The first installment of $100,000 and related interest payment of $50,000 is due on December 31, 2013, the end of the fiscal year. The entry to record the receipts of the first installment and related interest on December 31, 2013, will include a: A) Credit to Assessments Receivable—Current of $150,000 in the debt service fund. B) Credit to Revenues of $50,000 in the debt service fund. C) Credit to Assessment Receivable—Current of $150,000 in an agency fund. D) Credit to Revenues of $50,000 in an agency fund.

B) Credit to Revenues of $50,000 in the debt service fund. (Feedback: To answer this question it is first necessary to recognize that the accounting for debt service will require the use of a debt service fund since the city is secondarily obligated for the special assessment debt. Thus, choices C and D can be eliminated. As shown in journal entry 2 on p. 235 of the text, the only revenue to be recognized upon receipt of the first installment is the portion related to interest, or $50,000. Revenues of $100,000 for the first installment would have been previously accrued, as in journal entry 1. Choice A would have been correct had the amount been $100,000. Admittedly, this is a difficult question.)

After final inspection of the construction work on its new county jail, Carter County incurred an additional $50,000 of costs for site cleanup and interior rework performed by employees of the Public Works Department. The County had previously retained $40,000 of construction billings from the jail contractor to cover rework or project remediation. The journal entry or entries to record the additional work will include a: A) Debit to Construction Expenditures in the amount of $50,000 in the capital projects fund journal. B) Debit to Construction Expenditures in the amount of $10,000 in the capital projects fund journal. C) Debit to Contracts Payable—Retained Percentage in the amount of $10,000 in the governmental activities journal. D) Both B and C are correct.

B) Debit to Construction Expenditures in the amount of $10,000 in the capital projects fund journal. (Feedback: Construction Expenditures is debited for the amount that the cost of additional remedial work by a government's own force exceeds the balance of Contracts Payable—Retained Percentage. In this case, the debit is for $10,000 since that is how much the cost of site cleanup and interior rework exceeds the $40,000 balance of retained monies. Choice C is incorrect because the debit to Contracts Payable—Retained Percentage should be for the full amount of $40,000 that had been retained.)

A serial bond issue in which no principal is repaid for several years, but thereafter an equal amount of principal is repaid each year is called a (an): A) Regular serial bond issue. B) Deferred serial bond issue. C) Annuity serial bond issue. D) Irregular serial bond issue.

B) Deferred serial bond issue. (Feedback: This describes a deferred serial bond issue. See p. 221 of the text for a comparison of these bond issues.)

A debt service fund is a: A) Fiduciary fund. B) Governmental fund. C) Special purpose fund D) Proprietary fund.

B) Governmental fund. (Feedback: A debt service fund is one of the five types of governmental funds.)

Which of the following is not a general long-term liability disclosure requirement? A) A schedule showing changes in long-term liabilities during the reporting period. B) Information concerning the sources used to pay principal and interest. C) Information about the amount of principal and interest due in future years. D) Information on the amount of the general long-term liability due within one year.

B) Information concerning the sources used to pay principal and interest. (Feedback: The GASB requires information concerning the liability, however, there is no requirement that information related to how the liability will be paid be provided. A, C and D are required disclosures concerning the liability as indicated on page 211.)

The city's Solid Waste Disposal Fund transferred $560,000 of cash to the city's General Fund to help the General Fund cover operating expenditures. How would the transfer be reported in the Solid Waste Disposal Fund's statement of cash flows? A) Operating activity B) Noncapital financing activity. C) Capital and related financing activity. D) It would not be reported since it involved a transfer between two funds of the same government.

B) Noncapital financing activity. (Feedback: Noncapital financing activities include subsidies (transfers) to other funds of the city, making Choice B the correct answer (see p. 259).)

In an internal service fund the account Billings to Departments is reported as a (an): A) Current asset on the statement of net position. B) Operating revenue. C) Interfund loan. D) None of the above.

B) Operating revenue. (Feedback: This is the operating revenue account used by many internal service funds. It is a temporary operating statement account that increases unrestricted net position when closing entries are posted. Thus, Choices A and C are incorrect responses.)

An interfund transfer from the General Fund to partially finance a capital projects fund would be reported by the capital projects fund as a (an) A) Fund balance addition. B) Other financing source. C) Revenue. D) Current liability.

B) Other financing source. (Feedback: This interfund transfer would be recorded as an other financing use by the General Fund and as an other financing source by the capital projects fund.)

The state government received $10,000,000 in federal grants that must be distributed to cities and towns for social services based on an assessment of community need. Which of the following fund types would the state government use to account for the receipt and transfer of these monies to local governments? A) Agency. B) Special revenue. C) Private-purpose trust. D) Any of the above would be acceptable.

B) Special revenue. (Feedback: The primary considerations are whether the state government has administrative involvement (i.e., monitoring responsibility, determination of eligibility, or has the ability to exercise discretion in how the funds are allocated) or direct financial involvement in terms of matching funds or making up disallowed costs. GASB standards indicate that there is administrative involvement if the recipient government determines eligibility, which is the situation here. Thus, a special revenue fund must be used here rather than an agency fund. The state government then recognizes revenues for the receipt of the resources and expenditures as grants are distributed to recipient governments.)

The financial position of the City Employee Retirement Fund administered by the city should be reported in the city's basic financial statements as a column in the: A) Balance sheet—governmental funds. B) Statement of fiduciary net position. C) Statement of net position at the government-wide level. D) Both B and C.

B) Statement of fiduciary net position. (Feedback: Fiduciary activities are reported in fiduciary fund financial statements but not at the government-wide level (choice C) or with governmental funds (choice A).)

Which of the following would not be reported as a general capital asset? A) Water rights acquired by the state's Department of Conservation, a function of the General Fund. B) The inventory of asphalt held by the city's Street Maintenance Department, a function of the General Fund. C) A new bridge constructed by the county and maintained by the Public Works Department, a function of the General Fund. D) The sculptures of an internationally known local artist purchased by the mayor's office, a function of the General Fund, for display in city hall.

B) The inventory of asphalt held by the city's Street Maintenance Department, a function of the General Fund. (Feedback: Of the items listed, only inventory would be considered a current asset rather than a capital asset. Water rights are intangible assets, which are classified as capital assets under GASB standards. The bridge is an infrastructure asset. Since it is maintained by a function of the General Fund it would be considered a general capital asset. Sculptures would be classified as works of art. It is possible that the city would opt not to record works of art as a general capital asset, but it must report (note disclosure) the assets even if it opts not to record them.)

Elm City reported the following information pertaining to its pensions for fiscal year 2014, based on GASB standards applicable to the employer. Net Pension Obligation (NPO), 1-1-14 (arising from prior contributions defiencies): $2,800,000 Annual Required Contribution (ARC): $6,000,000 Actual contribution for FY2014: $5,700,000 Discounted present value of NPO, 1-1-14: $152,000 Based on the preceding information, and assuming the interest rate applicable to the NPO is 8 percent, Elm City's annual pension cost for the year 2014 is: A) $6,328,000. B) $6,276,000. C) $6,072,000. D) Some other amount.

C) $6,072,000. (Feedback: The solution to this question is (see Illustrations 8-13 and 8-14): $6,000,000 + (0.08 X $2,800,000) - $152,000 = $6,072,000.)

Which of the following would be reported as a general capital asset? A) A garbage truck purchased and used by the city's Solid Waste Disposal Fund, an enterprise fund. B) An off-set printer purchased and used by the city's Central Duplicating Fund, an internal service fund. C) A computer purchased and used by the Finance Department, a function of the General Fund. D) All of the above are general capital assets.

C) A computer purchased and used by the Finance Department, a function of the General Fund. (Feedback: As indicated in Chapter 5, a capital asset acquired and used by an activity accounted for in a governmental fund type is a general capital asset. These assets are accounted for in the governmental activities general ledger at the government-wide level and not in any governmental fund. A capital asset owned by a proprietary or fiduciary fund is accounted for in that fund and is reported as an asset of that fund. Internal service fund capital assets are also reported in the Governmental Activities column of the government-wide statement of net position if the internal service fund predominately serves governmental funds. Enterprise fund capital assets are reported in the Business-type Activities column of the government-wide statement of net position. Fiduciary fund financial information, including that related to capital assets, is reported only in the fund financial statements and not in the government-wide financial statements.)

A local philanthropist gave the city government $1,000,000 which is to be permanently invested. Earnings, measured on the accrual basis, will be used to provide financial relief to the families of firefighters and police officers killed in the line of duty. The city should account for this endowment and its operation in a (an) A) Investment trust fund. B) Special revenue fund. C) A private-purpose trust fund. D) A permanent fund.

C) A private-purpose trust fund. (Feedback: The facts in this case indicate that the endowment is intended to benefit private individuals. Since the endowment neither supports the government nor an ongoing public-purpose program of the government the use of a private-purpose trust fund would be appropriate.)

How does an internal service fund differ from an enterprise fund? A) An internal service fund's primary revenue source is user charges. B) An internal service fund is a proprietary fund. C) An internal service fund's primary customers are departments of the same government. D) An internal service fund's focus is on the economic flow of resources.

C) An internal service fund's primary customers are departments of the same government. (Feedback: One of the primary differences between an internal service fund and an enterprise fund is that an internal service fund primarily provides services for departments of the same government; whereas, an enterprise fund typically provides services to the public.)

GASB standards recommend the use of: A) A separate debt service fund for each debt to be serviced. B) The General Fund for all but the most complicated debt service. C) As few debt service funds as necessary, consistent with legal requirements. D) Debt service funds for general obligation long-term debt and the General Fund for operating long-term debt.

C) As few debt service funds as necessary, consistent with legal requirements. (Feedback: Choices B and D are fictitious. Choice C, not A, is consistent with GASB's preference for the fewest possible debt service funds within the limits of legal requirements and good management (see pp. 218-219 of text).)

The Fulton Municipal Golf Course, an enterprise fund, issued a long-term mortgage note to finance the construction of a new clubhouse. Issuance of the note would be reported in which section of the statement of cash flows? A) Investing activities. B) Noncapital financing activities. C) Capital and related financing activities. D) Operating activities.

C) Capital and related financing activities. (Feedback: Since this note is intended to finance capital construction, its issuance would be reported in the capital and related financing activities section of the statement of cash flows.)

During the current fiscal year, Midwest City incurred $500,000 of construction costs on its new city jail project and $15,000 of interest expense for bonds issued to finance the project. The City's engineers estimated the project, begun early in the current fiscal year, was 50 percent complete at year-end. Midwest City's financial statements will reflect which of the following items related to this project? A) Construction Work in Progress of $515,000 in the Governmental Activities column of the government-wide statement of net position. B) Construction Expenditures of $515,000 in the capital projects fund statement of revenues, expenditures, and changes in fund balances. C) Construction Work in Progress of $500,000 in the Governmental Activities column of the government-wide statement of net position. D) Both A and B are correct.

C) Construction Work in Progress of $500,000 in the Governmental Activities column of the government-wide statement of net position. (Feedback: Construction Work in Progress is a capital asset account. Therefore, it would be reported in the Governmental Activities column of the government-wide statement of net position but not on the balance sheet for the capital projects fund. Choices A and B are incorrect in that interest expense incurred for construction is not capitalized for general capital assets, per the discussion on pp. 186 and 194 of the text.)

When Stoddard County levies taxes for certain of its funds, as well as for several independent governments located within the county, its tax agency fund should: A) Credit Revenues—Property Taxes. B) Credit Estimated Uncollectible Current Taxes. C) Credit Due to Other Funds and Governments. D) Both A and B.

C) Credit Due to Other Funds and Governments. (Feedback: Recall that an agency fund has no net position nor does it have additions and deductions. In fact, no fiduciary funds report revenues and expenses. Choices A and B represent the credit portions of the journal entries that would be made by the funds and governments for which the taxes are being levied. In the tax agency fund, the credit will be to Due to Other Funds and Governments as in Entry 1 on p. 312 of the text.)

Elm City sold a truck for $5,000 that had an original cost of $32,000. Accumulated depreciation on the truck, which had been used by the Parks and Recreation Department, amounted to $28,000 at the date of the sale. The journal entries to record this transaction will include a (an): A) Debit to Cash for $5,000 in the General Fund journal only. B) Credit to Other Financing Sources—Proceeds of Sales of Assets for $1,000 in the governmental activities journal. C) Credit to Gain on Disposal of Equipment for $1,000 in the governmental activities journal at the government-wide level. D) All of the above.

C) Credit to Gain on Disposal of Equipment for $1,000 in the governmental activities journal at the government-wide level. (Feedback: Choice A is incorrect since Cash would be debited in both the General Fund and governmental activities journals. Choice B is incorrect since the amount of the credit would be $5,000.)

Lincoln School District transferred U.S. Treasury bonds from investments held in its debt service fund to the Lincoln County Investment Pool. At the date of the transfer, the bonds had a fair market value of $1,040,000, but the carrying value in the School District's debt service fund was $1,000,000. The debt service fund of the School District would record the transfer of these securities to the investment pool with a: A) Debit to Equity in Pooled Investments for $1,000,000. B) Credit to Investments—U.S. Treasury Bonds for 1,040,000. C) Credit to Revenues—Change in Fair Value of Investments for $40,000. D) Credit to Investments—U.S. Treasury Bonds for $40,000.

C) Credit to Revenues—Change in Fair Value of Investments for $40,000. (Feedback: The full entry (see Entry 1a on p. 318) would be to debit Equity in Pooled Investments for $1,040,000 and credit Investments—U.S. Treasury Bonds for $1,000,000 and credit Revenues—Change in Fair Value of Investments for $40,000.)

During the current fiscal year, the Town of Irvin issued bonds at a premium to finance the construction of a new town hall. At year-end an adjusting entry will be made to amortize the premium in which of the following journals? A) Debt service fund general journal: yes, Governmental activities general journal: no B) Debt service fund general journal: yes, Governmental activities general journal: yes C) Debt service fund general journal: no, Governmental activities general journal: yes D) Debt service fund general journal: no, Governmental activities general journal: no

C) Debt service fund general journal: no, Governmental activities general journal: yes (Feedback: Amortization of premium is normally part of the interest expense accrual adjusting entry at year-end. Since the debt service fund accounts for expenditures rather than expenses, this adjusting entry would be made in the governmental activities journal only.)

Over the past 10 years, Fairfield Township has accumulated $1,500,000 in a sinking fund pursuant to the covenants on a term bond issue. According to GASB standards, long-term sinking fund investments must be reported at: A) Cost. B) Lower of cost or market. C) Fair value. D) It depends on whether the investments are in equity or debt securities.

C) Fair value. (Feedback: GASB standards require that all investments, except for fixed income securities maturing in less than one year, be reported at fair value.)

Which of the following is not a true statement regarding segment reporting for enterprise funds? A) A segment is an identifiable activity reported as or within an enterprise fund or an other stand-alone entity for which one or more revenue-backed debt securities are outstanding. B) Segment reporting is not required for an activity that is reported as a major fund. C) Full financial statements are required for each reportable segment. D) Condensed financial statements are required for each reportable segment.

C) Full financial statements are required for each reportable segment. (Feedback: Choices A and B are correct statements, as is Choice D. Only condensed financial statements need be provided for each reportable segment, not full financial statements.)

Which of the following correctly states where enterprise fund data should be reported in the government-wide financial statements? A) Governmental activities: Yes, Business-type activities: No B) Governmental activities: No, Business-type activities: No C) Governmental activities: No, Business-type activities: Yes D) Governmental activities: Yes, Business-type activities: Yes

C) Governmental activities: No, Business-type activities: Yes (Feedback: In the government-wide financial statements all enterprise fund financial information is reported in the Business-type Activities column.)

A sound investment strategy would: A) Prohibit investments in derivatives. B) Maximize the portfolio return by investing general obligation bond proceeds in the highest yielding investments until such time as the bond proceeds are needed (e.g., to pay construction expenditures). C) Provide a benchmark for total return on the portfolio. D) All of the above are indications of a sound investment strategy.

C) Provide a benchmark for total return on the portfolio. (Feedback: A sound investment strategy focuses on identifying risk tolerance, rather than specific types of investment (making Choice A incorrect). Choice B is incorrect since Internal Revenue Code arbitrage rules would indicate that a good strategy would focus on preventing violations of the arbitrage rules, rather than focusing on the highest possible return (see p. 341). Choice C is correct since a sound strategy should focus on providing a benchmark against which to evaluate the total return or yield of the investment portfolio (see p. 341).)

Which of the following resource inflows would properly be classified as revenue of a debt service fund? A) Taxes collected by the General Fund and transferred to the debt service fund. B) Receipt of the premium on a new bond issue. C) Receipt of the interest earned on investments held in the debt service fund. D) None of the above should be classified as revenue of the debt service fund.

C) Receipt of the interest earned on investments held in the debt service fund. (Feedback: Choices A and B are both Other Financing Sources. Choice C describes a revenue item (see p. 219 of text).)

The county issued bonds to construct a new jail facility. Sale of the bonds occurred between interest payment dates. Which of the following statements concerning the sale of bonds between interest payment dates is correct? A) Additional cash, in the amount of the accrued interest, will be available for use by the capital projects fund. B) The capital projects fund will have a decrease in cash available for use equal to the amount of accrued interest. C) The amount of accrued interest will have no effect on the cash available for use by the capital projects fund. D) It is a management decision how accrued interest is used by the capital projects fund.

C) The amount of accrued interest will have no effect on the cash available for use by the capital projects fund. (Feedback: Accrued interest is the result of the party buying the bonds paying up front the amount of interest accrued (but not earned by the buyer) from the date of the bond issue to the date of purchase. As a result, the additional cash resulting from accrued interest is used by the debt service fund to make the first interest payment due on the debt used to finance the new jail facility. Therefore, the accrued interest has no effect on the cash available for use by the capital projects fund.)

A city completed construction of its new library. It was decided that the $10,000 remaining in the capital projects fund at the completion of construction should be used to service the long-term debt issued to construct the library. Which of the following is correct concerning the closing of the capital projects fund? A) The capital projects fund would debit Expenditure—Principal and credit Cash for $10,000. B) The capital projects fund would debit Other Financing Uses—Interfund Transfer Out and credit Fund Balance for $10,000. C) The governmental activities journal at the government-wide level would make no journal entry. D) None of the above journal entries is correct concerning the closing of the capital projects fund.

C) The governmental activities journal at the government-wide level would make no journal entry. (Feedback: Since the $10,000 remaining in the capital projects fund is to be used to service long-term debt, it should be transferred to the debt service fund. To record the transfer of funds the capital projects fund would debit Other Financing Uses—Interfund Transfer Out and credit Cash for the $10,000, making choices A and B incorrect. Because the transfer occurs between two governmental funds, it would not be recorded at the government-wide level, as indicated by choice C.)

Which of the following capital assets would not be depreciated? A) The city's police vehicles. B) Purchased computer software. C) The partially completed city hall. D) The art work owned and displayed in the city parks.

C) The partially completed city hall. (Feedback: Depreciation is reported for all depreciable capital assets reported on the government-wide statement of net position, both those reported in the Governmental Activities column (i.e., general capital assets and most internal service fund capital assets) and those reported in the Business-type Activities column (i.e., enterprise fund capital assets). Depreciation is generally not recorded on construction work in progress until the asset is completed and reclassified as a depreciable asset. Choice D might be a correct answer, if the art work is capitalized, as discussed on page 171 of the text.)

Which of the following activities or services is least likely to be accounted for as an enterprise fund? A) A city swimming pool. B) The provision of water to city residents. C) The provision of central purchasing and warehousing of the city's supplies. D) A municipal golf course.

C) The provision of central purchasing and warehousing of the city's supplies. (Feedback: An activity that centralizes purchasing and warehousing of supplies is one of the more common activities to be accounted for as an internal service fund rather than an enterprise fund since such an activity mainly serves departments of the same government. The other three choices operate from fees charged to the public and therefore would likely be accounted for as an enterprise fund.)

Jasper City issued $10,000,000 of bonds for a new water pumping station. Payment of principal and interest on these bonds will be made by the Water Utility Fund, an enterprise fund, from additional fees to be charged for water usage. Based on this information, which of the following is a correct statement about the liability for these bonds? A) This liability is a general long-term liability. B) This liability is not a liability of Jasper City. Therefore, it would not be reported in the basic financial statements but would be disclosed in the notes to the financial statements. C) This liability is a Water Utility Fund liability. D) This liability would be reported in the Governmental Activities column of the government-wide financial statements.

C) This liability is a Water Utility Fund liability. (Feedback: This liability is properly reported as a fund liability of the Water Utility Fund and not as a general long-term liability. The liability would be reported on the Statement of Net Position—Proprietary Funds and in the Business-type Activities column of the government-wide statement of net position.)

In enterprise fund accounting, restricted assets are: A) Those that management has designated for specific purposes or functions, such as future construction. B) Those that are designed for a limited range of uses; for example, a special purpose vehicle designed for use of personnel of an electric utility in installing power line poles. C) Those whose use is restricted by contractual agreements or legal requirements. D) All of the above.

C) Those whose use is restricted by contractual agreements or legal requirements. (Feedback: Hopefully, you realized that Choice B was a bit whimsical in this situation. Restricted assets relate to limitations or restrictions placed on assets by those external to the government; such as, contributions or grants that must be used for capital acquisition and amounts set aside to conform to debt covenant requirements. Choice A refers to restrictions placed by those inside government (management); therefore, Choice B is the only correct choice.)

he Village of Jonesburg had the following General Fund capital outlay expenditures during its current fiscal year: Police cruiser for Police Department: $47,000 Personal computer for Village Clerk's Office: $3,000 Assuming these were the only capital outlays for the fiscal year, the amount to be reported as capital assets on the Village's General Fund balance sheet at the end of the current fiscal year is: A) $50,000 B) $47,000 C) $3,000 D) $0

D) $0 (Feedback: This may seem to be a trick question, but it really is not. Just recall that capital assets are not reported on the balance sheet of any governmental fund. Instead, all general capital assets are reported in the Governmental Activities column of the government-wide statement of net position.)

St. Bernard County levies and collects taxes for its own funds as well as several independent governments located within the county. State law permits the county to retain 1 percent of the amount of taxes collected for other governments to help defray the costs of tax administration. Which of the following would be recorded for collection fees retained by the county? A) A debit by the Tax Agency Fund to Taxes Receivable. B) A debit by the General Fund to Taxes Receivable. C) A credit by the Tax Agency Fund to Revenues. D) A credit by the General Fund to Revenues.

D) A credit by the General Fund to Revenues. (Feedback: Collection fees would be credited to Revenues in the General Fund, the fund that provides budgeted resources for tax administration. Revenues are never recorded in an agency fund.)

Which of the following liabilities is properly reported in the Governmental Activities column of the government-wide statement of net position? A) Tax-supported general obligation bonds. B) The long-term portion of compensated absences. C) The long-term portion of judgments and claims. D) All of the above

D) All of the above (Feedback: All of these liabilities are general long-term liabilities and are thus reported as governmental activities at the government-wide level.)

Employer contributions to a Public Employee Retirement System (PERS) should be reported as: A) An expenditure of the General Fund for employees paid by the General Fund. B) An expense of a proprietary fund for employees paid by a proprietary fund. C) An addition in the PERS. D) All of the above.

D) All of the above. (Feedback: All of the above are correct statements of how employer contributions to a PERS should be reported.)

Which of the following funds focuses on the measurement of economic resources using accrual accounting? A) Agency. B) Private-purpose trust. C) Pension trust. D) All of the above.

D) All of the above. (Feedback: All of these funds, as well as investment trust funds, are fiduciary funds. All fiduciary funds focus on the measurement of economic resources using the accrual basis of accounting.)

The City of Centralia issued $2,500,000 of Series B Refunding Bonds which, along with $700,000 of cash accumulated in a sinking fund, was used to redeem $3,200,000 of term bonds that had been outstanding for several years. To account for redemption of the term bonds will require a: A) Debit to Other Financing Uses in the amount of $2,500,000 in the debt service fund. B) Debit to Expenditures in the amount of $700,000 in the debt service fund. C) Debit to Term Bonds Payable in the amount of $3,200,000 in the governmental activities journal at the government-wide level. D) All of the above.

D) All of the above. (Feedback: In the debt service fund, expending a government's own funds previously accumulated in the debt service requires a debit to Expenditures. Expending borrowed funds, such as refunding bond proceeds, requires a debit to Other Financing Uses. It is also necessary to eliminate the Term Bonds Payable liability balance from the governmental activities ledger account.)

From question 10 recall that the City of Ashland Investment Pool has three participants, X, Y, and Z. Their relative equities in the pool at a particular point in time were 45 percent, 30 percent, and 25 percent, respectively. Near the end of the year, participant X withdrew $1,000,000 from the pool after which its share of the pool fell to 40 percent. Which of the following is a true statement after X made its withdrawal? A) Participant Y's equity in dollars is unchanged. B) Participant Y's percentage share of future investment earnings and changes in fair value of investments has increased. C) Participant Z's percentage share of future investment earnings and changes in fair value of investments has increased. D) All of the above.

D) All of the above. (Feedback: Since Choices A, B, and C are true, the answer must be all of the above.)

Which of the following is a required disclosure regarding capital assets? A) Capital assets that are not being depreciated should be reported separately from those that are being depreciated. B) Depreciation expense for the year with disclosure of the amounts charged to each function on the statement of activities. C) An explanation concerning major changes in a capital asset category during the year. D) Both A and B are required disclosures.

D) Both A and B are required disclosures. (Feedback: Choices A and B are required disclosures about capital assets as discussed on pp. 171-172 of the text. While changes to capital asset categories are disclosed, no explanations concerning capital asset changes are required.)

Upon the recommendation of its communications director, the City Council has decided that Southland City's public access Internet system has become obsolete and, therefore, meets the GASB's definition of an impaired asset. The amount of impairment is estimated at $100,000. Assuming that the Internet system has been managed by the City's Public Affairs Department, a function of the General Fund, and is not insured, the asset impairment will be recorded as a: A) Debit to Other Financing Use—Decline in Value of Equipment the General Fund general journal. B) Debit to Expenses—Public Affairs. C) Credit to Equipment in the governmental activities journal at the government-wide level. D) Both B and C are correct.

D) Both B and C are correct. (Feedback: Choice A is incorrect because the loss is not reported at all in the governmental funds operating statement, but instead is reported as program expense of the appropriate governmental activities function or program as indicated in Choice B. Choice C is also required, as indicated on p. 180 of the text.)

In accounting for a municipally owned electric utility, customer deposits are reported as: A) Revenues from Customer Deposits. B) A restricted asset. C) A liability payable from restricted assets or as a current liability. D) Both B and C are correct.

D) Both B and C are correct. (Feedback: Deposits collected from customers when they sign up for service belongs to the customer and must be returned to the customer, either when they have established a reliable payment record or, more commonly, upon termination of service. While the utility is holding the deposit, the cash is reported as a Restricted Asset and as a liability (either a current liability or as a liability payable from restricted assets, if that caption is used).)

Immediately after making its annual $30,000 lease payment on June 30, 2013, the last day of its fiscal year, a certain city had an unpaid capital lease obligation of $155,000. The interest rate applicable to the lease is 8 percent. When the $30,000 lease payment due on June 30, 2014, is made, the journal entry for the governmental activities accounts will include: A) A debit to Capital Lease Obligation Payable in the amount of $30,000. B) A debit to Capital Lease Obligation Payable in the amount of $17,600. C) A Credit to Cash in the amount of $30,000. D) Both B and C are correct.

D) Both B and C are correct. (Feedback: Of the $30,000 FY 2013 lease payment, 0.08 X $155,000 or $12,400 represents interest on the unpaid balance. Thus, $30,000 - $12,400 or $17,600 is the amount of reduction of the lease obligation as of June 30, 2013. This would then be the amount debited at the time of the lease payment to Capital Lease Obligations Payable. Cash would be credited for the full $30,000 payment.)

The City of Ashland Investment Pool has three participants, X, Y, and Z. Their relative equities in the pool at a particular point in time were 45 percent, 30 percent, and 25 percent, respectively. At the end of the year, additional investment earnings were accrued in the investment pool in the amount of $100,000 and a report of the earnings was sent to participants X, Y, and Z. To record its share of the accrued interest, participant Y will: A) Debit Interest Receivable for $30,000. B) Debit Equity in Pooled Investments for $30,000. C) Credit Revenues for $30,000. D) Both B and C are correct.

D) Both B and C are correct. (Feedback: Participant Y's journal entry would be to debit Equity in Pooled Investments and credit Revenues—Investment Earnings, both in the amount of $30,000 ($100,000 times Y's 30 percent share).)

The difference between the amount of the legal debt limit and the net amount of outstanding indebtedness subject to the limit is called the: A) Total direct debt. B) Authorized debt. C) Assessed valuation subject to limitation. D) Debt margin.

D) Debt margin. (Feedback: While A, B and C may appear logical, they are fictitious terms. Debt margin is the correct response.)

A city uses a debt service fund to account for principal and interest payments on debt. When a principal payment is made, it will require a journal entry in the: A) Debt service fund general journal: yes, Governmental activities general journal: no B) Debt service fund general journal: no, Governmental activities general journal: no C) Debt service fund general journal: no, Governmental activities general journal: yes D) Debt service fund general journal: yes, Governmental activities general journal: yes

D) Debt service fund general journal: yes, Governmental activities general journal: yes (Feedback: Payment of principal or interest will require entries in both the debt service fund and the governmental activities journals. In the debt service fund the principal payment will be recorded as an expenditure, while the governmental activities journal will record it as a reduction of the long-term liability, bonds payable. So, D is the correct choice.)

An arrangement in which a city deposits cash or other assets in an irrevocable trust with an escrow agent to be used solely for satisfying future scheduled payments of both interest and principal of outstanding debt is known as a (an): A) Advance refunding. B) Redemption in advance. C) Legal defeasance. D) In-substance defeasance.

D) In-substance defeasance. (Feedback: As discussed on p. 239 of the text, this statement describes the essence of a typical in-substance defeasance.)

Net position of an enterprise fund should be reported in which of the following categories? A) Contributed capital and retained earnings. B) Unreserved, reserved, and invested in capital assets. C) Unrestricted, restricted, and invested in capital assets, net of related debt. D) Net investment in capital assets; restricted; and unrestricted.

D) Net investment in capital assets; restricted; and unrestricted. (Feedback: In both the proprietary funds statement of net position and the government-wide statement of net position, net position is reported in the three categories listed in Choice D. Choice C was correct prior to GASBS 63.)

GASB standards require that pricing of goods or services provided by enterprise funds must: A) Cover at least the marginal costs of the goods or services. B) Cover at least the variable costs of the goods or services. C) Cover the full cost of providing the goods or services. D) None of the above.

D) None of the above. (Feedback: The GASB does not set standards for operational decisions such as how to price the goods or services of an enterprise fund. The government is free to determine its own pricing policies.)

Which of the following is not one of the required financial statements for proprietary funds? A) Statement of net position. B) Statement of cash flows. C) Statement of revenues, expenses, and changes in fund net position. D) Statement of revenues, expenditures, and changes in fund balances.

D) Statement of revenues, expenditures, and changes in fund balances. (Feedback: The statement of revenues, expenditures, and changes in fund balances is a governmental fund financial statement.)