Multiple Choice Questions
Identify the best answer for each of the following:
1. Which of the following statements about Internal Service Fund liabilities is false?
a. Internal Service Funds may report both current and long-term liabilities.
b. Internal Service Funds may not issue bonds for financing purposes.
c. Internal Service Funds may report contingent liabilities.
d. Due to Other Funds would be reported as a current liability.

2. Initial financing for Internal Service Fund activities may be obtained from
a. Advances from another fund.
b. Transfers from other funds.
c. Transfer of related materials held by governmental departments.
d. All of the above.

3. The Yourtown Motor Pool Fund estimates that the cost of operating and maintaining its fleet of 20 vehicles during 20X8 will be $150,000. On the basis of past experience, each vehicle can be expected to be used 150 days during the year and can be expected to be driven 3,000 miles during the year. The other costs of operating the fund are estimated at $15,000 for the year. The price that the Motor Pool Fund should charge other Your-town government departments for use of a motor pool vehicle is
a. $50 per day.
b. $50 per day plus $0.25 per mile.
c. $2.50 per mile.
d. $2.75 per mile.

4. Transfers are always reported in an Internal Service Fund operating statement as
a. Revenues.
b. Other financing sources.
c. The last item before changes in net position.
d. Special items.

5. If a computer previously recorded in the General Capital Assets accounts is contributed to a department accounted for in an Internal Service Fund, the computer will be recorded in the Internal Service Fund accounts
a. At the original cost recorded in the General Capital Assets accounts.
b. At the historical cost, less the related accumulated depreciation on the contribution date.
c. At the computer’s fair market value on the contribution date.
d. At the computer’s replacement cost on the contribution date.

6. The charge by an Internal Service Fund department to other departments for a service should include
a. The direct cost to the fund of providing the service.
b. The direct cost to the fund of providing the service, plus a proportionate share of the fund’s variable overhead costs.
c. The direct cost to the fund of providing the service, plus a proportionate share of the fund’s total overhead costs.
d. The direct cost to the fund of providing the service, plus a proportionate share of the fund’s variable overhead costs, plus a reasonable cushion for contingencies and capital growth.

7. The activity level of an Internal Service Fund is normally controlled by
a. The appropriations made by its controlling legislative body.
b. The flexible budget enacted by its controlling legislative body.
c. The formal budget enacted by its controlling legislative body.
d. The needs of the various governmental departments using its services.

8. The actuarially based charges to the General Fund from a Self-Insurance Internal Service Fund should be reported in the Internal Service Fund as
a. Transfers.
b. Revenues.
c. Deferred inflows of resources until collected.
d. Deferred revenues until claims and judgments are incurred.

9. Loans to an Internal Service Fund from another fund are reported in the Internal Service Fund cash flow statement as
a. Cash flows from operating activities.
b. Cash flows from noncapital financing activities.
c. Cash flows from capital and related financing activities.
d. Cash flows from capital and related financing activities or as cash flows from noncapital financing activities depending on the purpose of the loan.

10. Transfers from an Internal Service Fund to another fund are reported in the Internal
Service Fund cash flow statement as
a. Cash flows from operating activities.
b. Cash flows from noncapital financing activities.
c. Cash flows from capital and related financing activities.
d. Cash flows from investing activities.