GOV-Propretary funds

Question 1

Dogwood City’s water enterprise fund received interest of $10,000 on long-term investments. How should this amount be reported on the Statement of Cash Flows?

Answer 1

Cash inflows from investing activities include:
•Receipts from collections of loans (except program loans) made by the governmental enterprise and sales of other entities’ debt instruments (other than cash equivalents) that were purchased by the governmental enterprise.
•Receipts from sales of equity instruments and from returns of investment in those instruments.
•Interest and dividends received as returns on loans (except program loans), debt instruments of other entities, equity securities, and cash management or investment pools.
•Withdrawals from investment pools that the governmental enterprise is not using as demand accounts.
NOTE:
In FASB interest received is reported in operating activities of the cash flow statement

Question 2

Which of the following statements is the most significant characteristic in determining the classification of an activity of an enterprise fund?

Answer 2

That the pricing policies of the activity establish fees and charges designed to cover its cost is the most important criterion from this list to use an enterprise fund to account for the activity. An enterprise fund would be required if the activity’s costs must, by law, be covered by fees and charges, not only by “taxes or similar revenues.”

Question 3

An unrestricted grant received from another government to support enterprise fund operations should be reported as:

Answer 3

Non operating revenue.
Note:
Restricted capital grants are reported as capital contributions. Neither contributed capital nor expenditures are reported for proprietary funds.

Question 4

Which format must an enterprise fund use to report cash flow operating activities in the statement of cash flows?

Answer 4

GASB 2450.128 clarifies that, for proprietary funds, a statement of cash flows should be presented using the direct method. This contrasts with practice in not-for-profit and for-profit entities that follow FASB guidance allowing the use of either the indirect or the direct method. Thus, the other answer choices would not apply to the enterprise fund of a government.

Question 5

Cy City’s Municipal Solid Waste Landfill Enterprise Fund was established when a new landfill was opened January 3, 2006. The landfill is expected to close December 31, 2027. Cy’s 2006 expenses would include a portion of which of the year 2027 expected disbursements?
I.Cost of a final cover to be applied to the landfill
II.Cost of equipment to be installed to monitor methane gas buildup

Answer 5

GASB L10.103 states that both the costs of a final cover to be applied to the landfill, and costs of postclosing monitoring equipment should be included in the estimated total current cost of landfill closure and postclosure care. GASB L10.106 states that for landfills using proprietary fund accounting, a portion of the estimated total current cost of landfill closure and postclosure care should be recognized as an expense and liability in each period that the landfill accepts solid waste.

Question 6

Which of the following fund types of a government reports a statement of net position?

Answer 6

The statement of net position reports the financial position of proprietary funds. Enterprise funds are a type of proprietary fund. Capital projects funds, special revenue funds, and permanent funds are all types of governmental funds that report financial position on a balance sheet. The net assets of proprietary funds are called net position. The net assets of a governmental fund are represented by Fund Balance.
Enterprise funds report-Net position
Gov funds report-fund balance

Question 7

Which of the following statements meet the measurement and recognition criteria for landfill closure and post-closure costs?

A.
Landfills should only be accounted for in the general fund.

B.
Total landfill liabilities should be recognized in the general long-term debt account group.

C.
Expense recognition should begin when waste is accepted and should continue through the post-closure period.

D.
Equipment and facilities included in estimated total current cost of closure and post-closure care should not be reported as capital assets.

Answer 7

Equipment and facilities included in the estimated total current cost of closure and post-closure care should not be reported as capital assets. Equipment, facilities, services, and final cover, included in the estimated total current cost, should be reported as a reduction of the accrued liability for landfill closure and post-closure care, when they are acquired.

Question 8

The billings for transportation services provided to other governmental units are recorded by the internal service fund as:

Answer 8

Operating Revenues