Question

In order to get a good rating, please explain how you arrived at each answer. Thank you.

EX. 9-2

Select the best answer.

1. A city’s general fund has an outstanding payable to its electric utility, which is accounted for in an enterprise fund. The utility has a corresponding receivable from the general fund. In the city’s government-wide statement of net position, which would be correct?

1. The payable and the corresponding receivable would be eliminated in the consolidation process and thus would not be reported.
2. The payable may be aggregated with payables to an internal service fund and reported as “payables to proprietary funds.”
3. The payable should be reported in the governmental activities column and the receivable in the business-type activities column.
4. The payable and the receivable would each be reported in the “totals” column, but would not be reported in either the governmental activities column or the business-type activities column.

2. A city’s general fund has an outstanding payable to its vehicle repair internal service fund, which has a corresponding receivable from the general fund. In the city’s government-wide statements, which would be correct?

1. The payable and the corresponding receivable would be eliminated in the consolidation process and thus would not be reported.
2. The payable may be aggregated with payables to an enterprise fund and be reported as “payables to proprietary funds.”
3. The payable would be reported in the “governmental activities” column and the receivable in the “business-type activities” column.
4. The payable and the receivable would each be reported in the “totals” column, but would not be reported in either the “governmental activities” column or the “business-type activities” column.

3. Which of the following projects is a state university most likely to finance with revenue bonds rather than general obligation bonds?

1. A football stadium
2. An outdoor swimming pool
3. An intramural field house
4. A boathouse for its rowing team

4. In what way would the statement of cash flows of a government-owned electric utility differ from that of a privately owned counterpart?

1. It would not include a category for operating activities.
2. It would have separate categories for cash flows from noncapital financing activities and cash flows from capital and related financing activities.
3. It would not include a category for cash flows from investing activities.
4. It would include a category for cash flows from other nonoperating activities.

5. A government decided to account for a vehicle repair service in an internal service fund rather than its general fund. In a year in which the repair service acquired an unusually large amount of repair equipment, the amount recorded as an expense in the internal service fund would be

1. the same as if the repair service were accounted for in the general fund.
2. greater than if the repair service were accounted for in the general fund because the general fund would not charge depreciation on the newly acquired assets.
3. greater than if the repair service were accounted for in the general fund because the internal service fund would charge depreciation on the assets but the general fund would not
4. less than if the repair service were accounted for in the general fund because the general fund would have recognized the entire cost of the equipment in the year acquired as an expenditure rather than the amount billed by the internal service fun

6. A school district’s internal service fund has cash on hand at year-end of $2 million. On its government wide financial statements, this amount would be reported as an asset in the

1. Governmental activities and total columns
2. Business-type activities and total columns
3. Total column only
4. Business-type activities column only

7. In its first year of operations, a self-insurance internal service fund billed the general fund $500,000 for premiums. Of this amount, $75,000 was intended for catastrophes. During the year, the insurance fund paid out $380,000 in claims, none of which was for catastrophes. As a consequence of these transactions, the insurance fund would report on its statement of net position

1. Net position of $120,000
2. Net position of $45,000
3. Reserve for catastrophes of $75,000
4. Claims reserves of $120,000

8. A city makes an interest payment of $6 million on its utility fund revenue bonds that were issued to finance new sewer lines. In the utility fund statement of cash flows, the payment would be reflected as a cash flow from

1. Operating activities
2. Noncapital financing activities
3. Capital and related financing activities
4. Investing activities

9. A utility fund temporarily invests the proceeds from the issuance of revenue bonds in U.S. Treasury bills and receives interest of $300,000. In the utility fund statement of cash flows, the receipt would be reflected as a cash flow from

1. Operating activities
2. Noncapital financing activities
3. Capital and related financing activities
4. Investing activities

10. A city’s transportation service, which is accounted for in an enterprise fund, has outstanding $10 million in revenue bonds. The bonds are also guaranteed by the city itself. These bonds should be reported as a liability in

1. Both the governmental fund statements and the proprietary fund statements, and in both the “business-type activities” column and the “governmental activities” column of the government-wide statements
2. Only the proprietary fund statements and the “business-type activities” column of the government-wide statements
3. Only the governmental fund statements and the “governmental activities” column of the government-wide statements
4. Only the proprietary fund statements

Answer 1

1) c) The payable should be reported in the governmetal activities column and the receivable in the business-type activities column.

Here payable to electric utility is a governmental activity and it is receivable from the general fund is recorded under business type activity because it is a kind of business activity for the city municpal corporation.

2) a) The payable and the corresponding receivablewould br eliminated in the consolidation processand thus would not be reported.

Because , both the payable and the receivable of the vehicle report service fund are from the genral fund , the final effect will be of no significance on consolidation.

3) a) A football stadium

A general obligation bond is secured by the governments pledge to repay the bond holders from legal resouces whereas a revenue bond is genrally issued to finance projects which genrate regular revenues , therefore a football stadium is the best option here to finance from revenue bonds.

4) b) It would have separate categories for cash flows from non capital financing activitis and cash flows from capital and related financing activities.

Because a goverment owned electric utility will have bith non capital financing activities and capital and related financing activities whereas a private organisation will only have capital financing activities.

5)d) less than if _ _ _ _ internal service fun.

Because if the repair service were accountedbin the internal service fund this amount would be more.

6)a)governmental activities and tital coloumn

Beacause the cash in hand is an asset for the government activity so it is accounted under the head governmental activities and total column.

7)a) net position of $120000

Beacause insurance fund premium=$500000-

Insurance fund paid out=$380000

$500000-$380000=120000

8)c) capital and relatedt financing activities

Beacuse these revenue bonds were issued to finance sewer lines so it is a financing activitiy.

9)d) investing activity

Here the revenue bonds are issued in T bills and therefore receiving interest of $300000 so it is an investment which is generating returns .

10)b ) only the proprietary fund _ _ _ statements

Because the transporation service is a business type activiyu so it is recorded under the propritary fund statemnet in business tyoe activity.