ACCT 4421 Ch 7 & 8 UPDATED ACTUAL
Exam Questions and CORRECT Answers
Which of the following is true of proprietary funds? - CORRECT ANSWER - They
operate on user charges.
Financial reporting requirements for proprietary funds are reported on the ______ basis of
accounting - CORRECT ANSWER - accrual
The format of the statement of net position for a proprietary fund displays which of the
following? - CORRECT ANSWER - assets, plus deferred outflows of resources, less
liabilities, less deferred inflows of resources, equals net position
Net investment in capital assets is calculated as which of the following? - CORRECT
ANSWER - gross capital assets net of accumulated depreciation, less any outstanding debt
related to the acquisition or construction of capital assets
True or false: The "dual-track" approach is used to capture the different bases of accounting for
internal service funds. - CORRECT ANSWER - False
[Reason: The dual track approach is not used since the basis is the same at the fund and
governmental wide level.]
Proprietary funds ______. - CORRECT ANSWER - are used to improve the management
of resources
Internal balances are reported in the government-wide statement of net position ______. -
CORRECT ANSWER - for purposes of fairly representing each reporting entity
Which of the following is true of proprietary fund financial statements? - CORRECT
ANSWER - They include the balance sheet, statement of revenues, expenses, and changes
in fund net position, and a statement of cash flows.
,The statement of net position for a proprietary fund shows which of the following? - CORRECT
ANSWER - current assets, capital assets, current liabilities, and net position
Net position is divided into which of the following components? - CORRECT ANSWER -
net investment in capital assets, restricted, and unrestricted
Which of the following accounts would appropriately be included on an enterprise fund balance
sheet? - CORRECT ANSWER - Fund Balance: No; Net Position—Unrestricted: Yes.
Which of the following is the appropriate basis of accounting for a custodial fund? - CORRECT
ANSWER - Accrual basis.
Under GASB standards, an internal service fund should prepare all of the following financial
statements except a:
- Statement of net position.
- Statement of cash flows.
- Statement of revenues, expenditures, and changes in fund balance.
- Statement of revenues, expenses, and changes in net position. - CORRECT ANSWER -
Statement of revenues, expenditures, and changes in fund balance.
Which of the following properly portrays the components of net position for proprietary funds? -
CORRECT ANSWER - Net investment in capital assets, Restricted, Unrestricted.
Customers' meter deposits, which cannot be spent for normal operating purposes, would be
classified as restricted cash in the balance sheet of which fund type? - CORRECT
ANSWER - Enterprise fund.
Which of the following is NOT true regarding proprietary funds?
- The difference between assets plus deferred outflows of resources and liabilities plus deferred
inflows of resources of proprietary funds is called net assets.
, - Proprietary funds record long-term debt directly in the fund accounts.
- Proprietary funds present a statement of cash flows.
- Proprietary funds record capital assets directly in the fund accounts. - CORRECT
ANSWER - The difference between assets plus deferred outflows of resources and
liabilities plus deferred inflows of resources of proprietary funds is called net assets.
Which of the following organizations or units would least likely be accounted for by an
enterprise fund?
- A golf course.
- A sports stadium.
- A motor pool.
- An airport. - CORRECT ANSWER - A motor pool.
Other postemployment benefits may include which of the following?
- Health care.
- Life insurance.
- Long-term care.
- All of these answers are correct. - CORRECT ANSWER - All of these answers are
correct.
Which of the following financial statements is prepared by fiduciary funds?
- Statement of fiduciary net position.
- Statement of fiduciary activities.
- Statement of fiduciary cash flows.
- All of these answers are correct. - CORRECT ANSWER - Statement of fiduciary net
position.
Which of the following may properly be reported as a component of net position in the
proprietary fund statement of net position?
- Retained earnings.
Exam Questions and CORRECT Answers
Which of the following is true of proprietary funds? - CORRECT ANSWER - They
operate on user charges.
Financial reporting requirements for proprietary funds are reported on the ______ basis of
accounting - CORRECT ANSWER - accrual
The format of the statement of net position for a proprietary fund displays which of the
following? - CORRECT ANSWER - assets, plus deferred outflows of resources, less
liabilities, less deferred inflows of resources, equals net position
Net investment in capital assets is calculated as which of the following? - CORRECT
ANSWER - gross capital assets net of accumulated depreciation, less any outstanding debt
related to the acquisition or construction of capital assets
True or false: The "dual-track" approach is used to capture the different bases of accounting for
internal service funds. - CORRECT ANSWER - False
[Reason: The dual track approach is not used since the basis is the same at the fund and
governmental wide level.]
Proprietary funds ______. - CORRECT ANSWER - are used to improve the management
of resources
Internal balances are reported in the government-wide statement of net position ______. -
CORRECT ANSWER - for purposes of fairly representing each reporting entity
Which of the following is true of proprietary fund financial statements? - CORRECT
ANSWER - They include the balance sheet, statement of revenues, expenses, and changes
in fund net position, and a statement of cash flows.
,The statement of net position for a proprietary fund shows which of the following? - CORRECT
ANSWER - current assets, capital assets, current liabilities, and net position
Net position is divided into which of the following components? - CORRECT ANSWER -
net investment in capital assets, restricted, and unrestricted
Which of the following accounts would appropriately be included on an enterprise fund balance
sheet? - CORRECT ANSWER - Fund Balance: No; Net Position—Unrestricted: Yes.
Which of the following is the appropriate basis of accounting for a custodial fund? - CORRECT
ANSWER - Accrual basis.
Under GASB standards, an internal service fund should prepare all of the following financial
statements except a:
- Statement of net position.
- Statement of cash flows.
- Statement of revenues, expenditures, and changes in fund balance.
- Statement of revenues, expenses, and changes in net position. - CORRECT ANSWER -
Statement of revenues, expenditures, and changes in fund balance.
Which of the following properly portrays the components of net position for proprietary funds? -
CORRECT ANSWER - Net investment in capital assets, Restricted, Unrestricted.
Customers' meter deposits, which cannot be spent for normal operating purposes, would be
classified as restricted cash in the balance sheet of which fund type? - CORRECT
ANSWER - Enterprise fund.
Which of the following is NOT true regarding proprietary funds?
- The difference between assets plus deferred outflows of resources and liabilities plus deferred
inflows of resources of proprietary funds is called net assets.
, - Proprietary funds record long-term debt directly in the fund accounts.
- Proprietary funds present a statement of cash flows.
- Proprietary funds record capital assets directly in the fund accounts. - CORRECT
ANSWER - The difference between assets plus deferred outflows of resources and
liabilities plus deferred inflows of resources of proprietary funds is called net assets.
Which of the following organizations or units would least likely be accounted for by an
enterprise fund?
- A golf course.
- A sports stadium.
- A motor pool.
- An airport. - CORRECT ANSWER - A motor pool.
Other postemployment benefits may include which of the following?
- Health care.
- Life insurance.
- Long-term care.
- All of these answers are correct. - CORRECT ANSWER - All of these answers are
correct.
Which of the following financial statements is prepared by fiduciary funds?
- Statement of fiduciary net position.
- Statement of fiduciary activities.
- Statement of fiduciary cash flows.
- All of these answers are correct. - CORRECT ANSWER - Statement of fiduciary net
position.
Which of the following may properly be reported as a component of net position in the
proprietary fund statement of net position?
- Retained earnings.
