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     16.     Under which of the following circumstances must an Enterprise Fund be used?
          a.     when its activities are partially financed with advances from the general fund
          b.     when its activities are financed with debt that is secured solely by the full faith and credit of the related primary government
          c.     when its activities are financed with debt that is secured solely by a pledge of the net revenues from the charges made by the activity
          d.     when its activities are financed in such a way that operating subsidies are never required from the general fund

 

 


     
     17.     Which of the following accounts properly would not appear in a proprietary-type fund balance sheet/statement of net assets?
          a.     accumulated depreciation
          b.     retained earnings
          c.     net assets, unrestricted
          d.     inventory

 

     18.     Which of the following accounts properly would not appear in the operating statement of a proprietary-type fund?
          a.     transfer in from the general fund
          b.     depreciation expense
          c.     expenditures--capital outlay
          d.     revenues--charges for services

 

     19.     Which of the following would least likely be accounted for in an Enterprise Fund?
          a.     a local government's mass transit operation
          b.     a public swimming pool for which the government charges admission fees
          c.     a municipal golf course
          d.     a fire department

 

     20.     Which of the following accounts would be least likely to appear in a proprietary-type fund balance sheet/statement of net assets?
          a.     cash and cash equivalents
          b.     general obligation bonds payable
          c.     net assets invested in capital assets, net of related debt
          d.     equipment acquired under capital leases

 

     21.     Which of the following proprietary-type funds normally would have the largest number of individual customers?
          a.     a water utility enterprise fund
          b.     a public golf course enterprise fund
          c.     a central stores internal service fund
          d.     a central printing services internal service fund

 

     
     22.     For fund-level financial reporting, a statement of cash flows is required for
                         Enterprise     Internal Service
                          Funds       Funds
          a.               yes     no
          b.               no     no
          c.               no     yes
          d.               yes     yes

 

     23.     An Enterprise Fund that operates on a calendar year basis pays $18,000 for a three-year insurance policy on January 1, 2008. In its financial statements for the year ended December 31, 2008, the Enterprise Fund should report:
          a.     an expense of $6,000; and an asset of $12,000
          b.     an expense of $18,000
          c.     an expense of $12,00; and an asset of $6,000
          d.     an asset of $18,000; and an expense of $6,000

 

     24.     City Parks Department activities are accounted for in the General Fund. The Parks Department receives two invoices, one from the Lighting Enterprise Fund (EF) and one from the Printing Internal Service Fund (ISF). On receiving the invoices, which accounts should the department debit?
          a.     due to lighting EF and due to printing ISF
          b.     expenditures (for lighting services) and expenditures (for printing services)
          c.     expenditures (for lighting services) and transfers (for printing services)
          d.     transfers (for lighting services) and expenditures (for printing services)

 

     25.     A Water Enterprise Fund (EF) issues $4 million of 5% revenue bonds on October 1, 2008. The EF will make its first payment of interest on March 31, 2009, together with a principal payment of $200,000. What amount, if any, should the EF report in its statement of revenues, expenses, and changes in fund net assets for the year ended December 31, 2008?
          a.     zero
          b.     interest expense of $100,000
          c.     interest expense of $50,000 and principal expense of $100,000
          d.     interest expense of $50,000

 


     
     26.     A city accounts for its hospital activity in an Enterprise Fund. An individual brings a malpractice suit against the hospital in 2008. City lawyers are concerned about losing the case if it goes to court, but think they can settle it out of court for $50,000. In any event, the city does not expect any cash outflows on the claim for several years. How should the Enterprise Fund report this item in its statements for the year ended December 31, 2008?
          a.     no reporting is necessary
          b.     the situation should be reported only by means of note disclosure
          c.     the enterprise fund should report an expense and a current liability of $50,000
          d.     the enterprise fund should report an expense and a noncurrent liability of $50,000

 

     27.     At December 31, 2008, a Water Enterprise Fund has outstanding revenue bonds payable of $1 million, of which $40,000 is due to be paid on February 15, 2009, and $50,000 is due to be paid on August 15, 2009. How should it report this liability in the fund-level statement of net assets as of December 31, 2008?
          a.     It should report $40,000 as a current liability and disclose $960,000 in a note
          b.     It should report $40,000 as a current liability and $960,000 as a noncurrent liability
          c.     It should report $90,000 as a current liability and $910,000 as a noncurrent liability
          d.     It should report no liability for this obligation on the fund-level statement of net assets

 

     28.     The Village of Olcott provides electricity to its residents through an Enterprise Fund (EF). The EF's fiscal year ends June 30. Its last payroll period starts June 26 and ends July 7. For financial reporting purposes, how should the EF handle the salaries earned by its employees June 26-30?
          a.     Nothing should be done, because nothing needs to be reported for the period June 26-30
          b.     The EF should report salary expense and a liability for salaries earned by employees during June 26-30
          c.     The EF should report a liability for salaries earned and expected to be earned from June 26 to July 7
          d.     The EF should disclose the salaries earned, but not paid, in a note to the financial statements


     
     29.     An Enterprise Fund issued bonds in the amount of $100,000 and immediately acquired capital assets from the bond proceeds at a cost of $100,000. As of December 31, 2008, accumulated depreciation on the assets was $10,000. Also, as of December 31, 2008, the Enterprise Fund had paid back $15,000 of the debt principal. In its December 31, 2008, statement of net assets, how much should the Fund report as net assets invested in capital assets, net of related debt?
          a.     $90,000
          b.     $85,000
          c.     $15,000
          d.     $5,000

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