Multiple Choice Questions
Identify the best answer for each of the following:
1. Which of the following statements about accounting principles used in Enterprise Funds is false?
a. Management may choose whether or not to apply recent FASB standards if they do not conflict with GASB standards.
b. An Enterprise Fund’s statement of cash flows is prepared in the same format as a statement of cash flows for a private-sector entity.
c. Enterprise Funds may adopt budgets on a basis of accounting contrary to GAAP.
d. GAAP does not require Enterprise Funds to legally adopt budgets.

2. Which of the following activities would be least likely to be operated as and accounted for in an Enterprise Fund?
a. Town planning department
b. Sports stadium
c. Parking garage
d. Mass transit authority

3. The City of Philaburg arranged for a 10-year, $40 million loan to finance construction of a toll bridge over the Tradewater River. If the toll bridge is accounted for as an Enterprise Fund activity and a certain portion of the tolls collected is required to be set aside for maintaining the bridge, these resources should be accounted for in
a. A Debt Service Fund.
b. The General Fund.
c. The Toll Bridge Enterprise Fund.
d. A Capital Projects Fund.

4. The fund equity of an Enterprise Fund could include any of the following except
a. Net investment in capital assets.
b. Fund balance.
c. Restricted net position.
d. Unrestricted net position.

5. The City of Silerville operates a water authority that sells water to city residents. Each new customer is required to pay a $75 deposit at the time of hookup. The deposit cannot be spent, but is returned with interest if the customer maintains a satisfactory payment record for two years. The city should record these deposits
a. In a Private-Purpose Trust Fund.
b. As restricted cash and a liability payable from restricted assets in the Water Fund.
c. As unrestricted cash and a long-term liability in the Water Fund.
d. As unrestricted cash and a liability payable from restricted assets in the General Fund.

6. Enterprise Fund transfers are reported in an Enterprise Fund’s operating statement as
a. Nonoperating revenues.
b. Other financing sources.
c. Special items.
d. The last items before the change in net position.

7. Enterprise Fund transfers are reported in an Enterprise Fund’s operating statement for
a. “Free” services provided to other departments.
b. Capital assets transferred in from other governments without compensation.
c. Interfund loans that are not to be repaid from available expendable financial resources.
d. Reassignments of capital assets to general government agencies.

8. Depreciation expense on all of an Enterprise Fund’s capital assets must be reported as expenses in the fund’s operating statement. However, expenditures to maintain certain capital assets may be expensed in lieu of reporting depreciation. These capital assets include
a. Infrastructure capital assets donated to the government.
b. Infrastructure capital assets that meet specific criteria.
c. Only infrastructure capital assets constructed or acquired prior to July 1, 1980.
d. Buildings.

9. Enterprise Fund resources of $3,000,000 are paid yearly to the General Fund. If these payments are payments in lieu of taxes (not payments for services), they should be recorded in the Enterprise Fund as
a. Expenses.
b. Other financing uses.
c. Reductions of revenues.
d. Transfers out.

10. Combining Enterprise Fund statements in the CAFR are required to include at a minimum:
a. Each individual Enterprise Fund.
b. Each individual major Enterprise Fund.
c. Each individual nonmajor Enterprise Fund.
d. Each individual Enterprise Fund used to account for activities that are required to be reported in Enterprise Funds.