ACC 460 Week 2 Exercise 7-16 Multiple Choice Assignment
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Complete the following multiple choice questions in Exercise 7-16, p. 294:
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Multiple Choice. Choose the best answer.
1. Within the government-wide financial statements, the column for Business-type Activities will generally include:
a. Internal service funds only.
b. Enterprise funds only.
c. All internal service fund and enterprise fund transactions added together and accounted for on the accrual basis of accounting.
d. All enterprise fund transactions and only the internal service fund transactions undertaken with governmental funds on the accrual basis of accounting.
2. Which of the following would most likely be accounted for in an internal service fund?
a. The city pool.
b. The city's investments, which are pooled with the county's and the school district's investments.
c. An asphalt plant used to supply the asphalt needed to resurface the city's streets.
d. Proceeds from an endowment that are used to maintain the city's library.
3. Under GASB standards, the City of Parkview is required to use an enterprise fund to account for its nature center if:
a. It charges fees to assist in paying for the maintenance of the nature center.
b. The Nature Center was originally financed through the issuance of general obligation bonds.
c. The ordinance that was passed to establish the nature center requires that all costs of the Nature Center be paid for by user fees.
d. All of the above are true.
4. During 2017, the Gateway City government recorded a $15,000 transfer from the General Fund to an internal service fund; a $25,000 transfer from the General Fund to an enterprise fund; a $10,000 transfer from an enterprise fund to an internal service fund, and a $5,000 transfer from an enterprise fund to the General Fund. In the Business-type Activities column of the government-wide financial statements, Gateway City should report:
a. Net transfers out of $5,000.
b. Net transfers in of $10,000.
c. Net Transfers in of $25,000.
d. Net Transfers in of $35,000.
5. Which of the following events would generally be classified as nonoperating on an enterprise fund's statement of revenues, expenses, and changes in net position?
a. Billing other funds of the same government for services.
b. Loss on the sale of a piece of equipment.
c. Depreciation expense.
d. Administrative expense.
6. In reviewing the accounting records of the Transportation Services Fund, an internal service fund of Douglas City, you notice that the fund uses budgetary accounts. This is most likely because
a. The administrators of the fund prefer to prepare a budget to use in managing the fund.
b. GASB requires the use of budgetary accounts in internal service funds.
c. The city council must legally approve the fund's budget.
d. The accountants for the fund are unfamiliar with proper accounting procedures for a proprietary fund.
7. Under GASB standards, which of the following events would be classified as an investing activity on a proprietary fund's statement of cash flows?
a. Interest earned on certificates of deposit held by the proprietary fund.
b. Purchase of equipment for use by the proprietary fund.
c. Grant received to construct a building that will be used by the proprietary fund.
d. All of the above would be considered investing activities for reporting purposes.
8. An internal service fund used for insurance activities should recognize an expense and a liability when:
a. A claim has been made, it is reasonably possible that a liability has been incurred, and the amount will be reasonably estimable at some time in the near future.
b. A claim has not been made, but it is reasonably possible that a liability has been incurred or an asset has been impaired, and an amount can be reasonably estimated.
c. A claim has been made, it is probable that an asset has been impaired, and the amount will be reasonably estimable at some time in the near future.
d. A claim has been made, it is probable that a liability has been incurred, and the amount can be reasonably estimated.
9. During the year an enterprise fund purchased $230,000 worth of equipment. The equipment was acquired with a cash down payment of $30,000 and a $200,000 loan. A partial year of depreciation on the equipment was taken in the amount of $23,000. What is the net effect of this transaction on the net position accounts of the enterprise fund?
a. Net investment in capital assets is increased by $7,000.
b. Net investment in capital assets is increased by $30,000.
c. Net investment in capital assets is increased by $207,000.
d. Net investment in capital assets is increased by $230,000.
10. Tinsel Town had the following long-term liabilities at year end:
What amount should be recorded as long-term liabilities in the proprietary fund financial statements?