how do you do number 94

Chapter 07 Accounting for the Business-type Activities of State and Local Governments True / False Questions 1. For proprietary funds, governments generally present a statement of net position in a format that displays assets, plus deferred outflows of resources, less liabilities, less deferred inflows of resources, equals net position. True False 2. Internal service funds of one government may not provide goods or services, on a cost-reimbursement basis, to other governments. True False 3. Revenues of internal service funds should be recognized only when they are expected to be available in time to pay current liabilities of the fund. True False 4. Internal service funds should account for operating expenditures on the accrual basis. True False 5. Internal service funds account within the fund for any long-term liabilities to be serviced from revenue derived from fund operations. True False 6. Internal service funds should not account for depreciation of capital assets used in their operations, since this would, in effect, charge the government twice for the same assets. True False 7. Internal service funds are intended to operate on taxes or other financing sources authorized by the legally enacted revenue budget for each year; therefore, they are classified as governmental funds. True False 8. The net position of an internal service fund consists of contributed equity and reserves for assets that will not be converted into cash in the normal operation of the fund. True False 9. In the information for the Supplies Fund that follows, the account "Interfund Loan from Electric Utility Fund" should be credited for $320,000 because this amount was borrowed from and will have to be repaid by the Supplies Fund. True False 10. In the information for the Supplies Fund that follows, the account "Interfund Transfer In from General Fund" should be credited for $89,200 because this amount was transferred from the General Fund to the Supplies Fund in a nonexchange transfer that will not have to be repaid. True False 11. The Encumbrances account should be used by an internal service fund in the same manner as by the General Fund. True False 12. Proprietary funds are accounted for in a manner similar to investor-owned businesses; among other features, the accrual basis of accounting is used and all of the capital assets used in fund operations are accounted for by the using fund. True False 13. Internal balances between governmental and business-type activities are reported in the government-wide statements. True False 14. Capital assets acquired under a capital lease for use by an internal service fund should be recorded in the General Fund in order to report all leased assets in one financial statement. True False 15. A statement of revenues, expenses, and changes in net position for an internal service fund is similar in many respects to an income statement prepared for an investor-owned business. True False 16. A statement of cash flows is not prepared for an internal service fund. True False 17. An internal service fund can be liquidated only if there is a ready and willing buyer for the fund's assets. True False 18. Public utilities owned and operated by governments are common examples of enterprise funds. True False 19. Enterprise funds are used by state and local governments to account for services that are provided to the general public on a user-charge basis, with prices set to recover the costs of operations, activities financed with debt secured solely by revenues from fees of the activity, activities required by law or regulations to recover operating costs from user charges, or any activity that the governing body of the government has decided should be accounted for on a "business basis." True False 20. The liability for utility revenue bonds should be reported in business-type activities on the government-wide statements, as well as in the enterprise fund. True False 21. Budgets for enterprise funds should be recorded in the accounts in the same manner as budgets for a General Fund or a special revenue fund. True False 22. Unbilled customer accounts receivable should be reflected in the balance sheet of a governmentally owned utility even though the exact amount of service to be billed is unknown until the customers' meters can be read. True False 23. General obligation bonds used to increase the capacity of a water treatment plant (part of a water utility enterprise fund), but for which the debt service (including repayment of principal) will be paid from general government revenues should be reported as a long-term liability in the water utility fund balance sheet. True False 24. Interest and principal on enterprise fund revenue bonds should be recorded in a debt service fund until paid. True False 25. Governments can follow either the GASB or FASB Codification. True False 26. The liability for long-term debt issued to provide financing for an enterprise fund and to be serviced from revenues of the enterprise fund should be reported in the financial statements of the enterprise fund, even though the debt also is backed by the general obligation credit of the government. True False 27. Utility enterprise funds that report to regulatory agencies may capitalize both actual interest paid on debt incurred for construction of plant assets and an imputed amount on their own funds so used. True False 28. In the context of regulatory utility plant accounting, original cost and historical cost have the same meaning. True False 29. The amount of expense and liability to be reported each period for the closure and postclosure costs of a municipal solid waste landfill (MSWLF) is proportional to the amount of landfill capacity used during the period. True False 30. The balance sheet format recommended for financial statements submitted to the NARUC and FERC for utilities subject to regulatory reporting requirements displays Utility Plant before Current and Accrued Assets and Long-Term Debt before Current and Accrued Liabilities. True False 31. GASB requires interest capitalization for self-constructed assets of proprietary funds, except those constructed with general long-term debt that will be repaid from resources of governmental activities. True False 32. To facilitate the combination of utility financial statements with the statements of other enterprise funds, GAAP permits utilities to follow the customary format used by nonutility business organizations. True False 33. Premiums or discounts on bonds payable issued by enterprise funds should be accounted for in the same manner as those of a comparable business entity. True False 34. Plant and equipment utilized by a governmentally owned utility should be depreciated in the same manner as if it belonged to an investor-owned utility. True False Multiple Choice Questions 35. Which of the following may properly be reported as a component of net position in the proprietary fund statement of net position? A. Retained earnings. B. Designated equity. C. Restricted net position. D. Contributed capital. 36. Which of the following properly portrays the components of net position for proprietary funds? A. Net investment in capital assets, Reserved, Unreserved. B. Designated, Undesignated, Restricted, Unrestricted. C. Net investment in capital assets, Restricted, Unrestricted. D. Contributed capital, Net investment in capital assets, R Unreserved. 37. Which of the following funds of a government uses the same basis of accounting as a proprietary fund? A. Perman ent trust. B. Investment trust fund. C. Special revenue. D. Capital projects. 38. Internal service funds should be used only if A. The reporting governm predominant participan activity. B. The reporting government provides services primarily participants. C. The reporting government provides services primarily the same government. D. The reporting government provides services to other d that covers the full cost of operations. 39. In which of the following funds is it appropriate to record depreciation of capital assets? A. Internal service fund. B. Permanent fund. C. General fund. D. Capital projects fund. 40. Which of the following is a difference between enterprise funds and internal service funds? A. The use of cost acco enterprise funds but service funds. B. The customers who primarily benefit from the fund's service. C. The number of basic financial statements required. D. The measurement focus on economic resources for en current financial resources for internal service funds. 41. Depreciation on capital assets used by an enterprise fund of a government A. Should not be recorded for infrastructure assets. B. Should be recorded in the General Fund as an expenditure. C. Should be recorded in the governmental activities accounts. D. Should be recorded in the enterprise fund as an expense. 42. The comprehensive annual financial report (CAFR) of a government should contain a statement of revenues, expenses, and changes in net position for A. Both proprietary and governmental funds. B. Proprietary but not governmental funds. C. Governmental but not proprietary funds. D. Proprietary and fiduciary funds. 43. Which of the following activities or services would most likely not be accounted for by an internal service fund? A. Electronic data processing. B. Central purchasing, warehousing, and issuing of supplies. C. Municipal golf course. D. Risk management. 44. When a supplies internal service fund records a billing to the General Fund, the journal entry in the internal service fund will include A. A debit to Cost of Supplies Issued. B. A debit to Loans Receivable. C. A debit to Billings to Department. D. A debit to Inventory of Supplies. 45. When a supplies internal service fund records a billing to the General Fund, the journal entry in the General Fund will include A. A debit to Cost of Supplies Issued. B. A credit to Interfund Loans Payable. C. A debit to Expenditures. D. A credit to Billings to Department. 46. Which of the following is not true regarding proprietary funds? A. The difference b liabilities of prop "fund balance." B. Proprietary funds record long-term debt directly in the accounts. C. Proprietary funds record capital assets directly in the f accounts. D. Proprietary funds present a statement of cash flows. 47. Which of the following is (are) an appropriate basis of accounting for an internal service fund? A. Modified accrual basis: Yes; accrual basis: No B. Modified accrual basis: No; accrual basis: Yes C. Modified accrual basis: Yes; accrual basis: Yes D. Modified accrual basis: No; accrual basis: No 48. Which of the following funds of a government would account for depreciation in the accounts of the fund? A. Gen eral. B. Internal service. C. Capital projects. D. Special revenue. 49. An internal service fund normally uses which of the following budgetary accounts? A. Estimated Revenues. B. Appropriation s. C. Encumbranc es. D. An internal service fund normally does not use budget accounts. 50. Under GASB standards, an internal service fund should prepare all of the following financial statements except for a A. Statement of revenues, expenditures, and change fund balance. B. Statement of revenues, expenses, and changes in net position. C. Statement of net position. D. Statement of cash flows. 51. In order to conform to GASB standards, goods and services provided by internal service funds to other departments of the government must be priced to A. Cover variable costs only. B. Cover full costs (both fixed and variable). C. Cover full costs, plus an additional charge to cover infl needs for expansion. D. GASB standards do not address appropriate fees. Eac determines its own operating and pricing policies, whic subsidizing the cost of operating an internal service fu 52. What amount of the following items should be accounted for in an internal service fund? A. $2,10 0,000. B. $1,760,00 0. C. $1,640,00 0. D. $350,00 0. 53. What amount of the following items should be accounted for in an enterprise fund? A. $2,10 0,000. B. $1,760,00 0. C. $1,640,00 0. D. $350,00 0. 54. To establish a new internal service fund with a transfer of funds (not to be repaid), which account would be credited in the internal service fund? A. Ca sh. B. Interfund Transfer In. C. Interfund Transfer Out. D. Estimated Revenues. 55. The City of Jennings operates a central motor pool as an internal service fund for the benefit of the city's other funds and departments. In the current year, this fund billed the Community Services Department $30,000 for vehicle rentals. What account should the internal service fund use to record these billings? A. Interfund Transfers In. B. Interfund Exchanges. C. Billings to Departments. D. Cost of Providing Rentals to Other Funds and Units. 56. When utility customers are billed during the year, the enterprise fund journal entry will include A. A debit to Sales of Water. B. A debit to Cash Restricted. C. A debit to Customer Accounts Receivable. D. All of the above. 57. When a new utility customer submits a deposit, the enterprise fund journal entry will include A. A credit to Customer Deposits. B. A debit to Customer Deposits. C. A debit to Sales of Water. D. A credit to Sales of Water. 58. GASB accounting and financial reporting standards for risk financing activities provide that an internal service fund should recognize claims expense and a related liability when a claim has been asserted and A. A municipal cou judgment to a cl General Fund). B. It is reasonably possible that a loss has been incurred reasonably estimated. C. It is probable that a loss has been incurred and the am estimated. D. A loss has been incurred, but the amount cannot be re estimated. 59. Which of the following is not a typical means of dissolving an internal service fund that a city no longer needs or wants? A. Conversion of th to cash and dist another fund or B. Transfer the fund's assets to another fund that will con operating activities. C. Distribute the fund's assets in kind to another fund or f continue the same or similar operating activities. D. Transfer the fund's assets to a not-for-profit organizati charitable services in the community. 60. Which of the following account balances would only be reported if a city-owned utility followed regulatory accounting principles? A. Depreciatio n expense. B. Pumping expense. C. Restricted Assets Cash. D. Utility Plant Acquisition Adjustments. 61. 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? A. Internal service. B. Private-purpose trust fund. C. Enterpris e. D. Special revenue. 62. Which of the following organizations or units would least likely be accounted for by an enterprise fund? A. A hospit al. B. An airport. C. The computer department. D. A sports stadium. 63. Which of the following accounts would appropriately be included on an enterprise fund balance sheet? A. Fund Balance: No; Net PositionUnrestricted: Yes B. Fund Balance: Yes; Net Position Unrestricted: No C. Fund Balance: No; Net Position Unrestricted: No D. Fund Balance: Yes; Net PositionUnrestricted: Yes 64. The water utility fund of the City of Pikesville uses cycle billing procedures. Under these procedures, the City of Pikesville will likely do which of the following on December 31, the end of its fiscal year? A. Read meters and bill all customers on December 31. B. Accrue revenue and a receivable for the number of da date for each customer until December 31. C. Ignore water consumed by customers from their last b December 31. D. Call the unbilled customers and request that they read meters. 65. The following cash transactions were among those reported by Crawford County's Water and Sewer Enterprise Fund for the year: In the Water and Sewer Enterprise Fund's statement of cash flows for the year ended December 31, what amount should be reported as cash flows from capital and related financing activities? A. $5,00 0,000. B. $6,000,00 0. C. $8,000,00 0. D. $9,000,00 0. 66. Which of the following is not a true statement about the Allowance for Funds Used During Construction (AFUDC)? A. AFUDC may have either component or an equity component. B. The amount credited to AFUDC may exceed the amou the period on bonds issued for construction. C. AFUDC may be credited for an imputed amount of inte funds used for construction. D. AFUDC may include the total amount of borrowing dur construction. 67. Which of the following items is not required to be included in the segment information that must be reported for a municipality's enterprise funds? A. Material enterprise fund capital assets. B. Material enterprise fund operating income or loss. C. Material enterprise fund tax revenues. D. Material intergovernmental operating subsidies to an enterprise fund. 68. A municipal solid waste landfill (MSWLF) accounted for by an enterprise fund should recognize an expense and liability for the year in the amount of A. The estimated t closure and pos determined at th placed into initia the estimated n landfill will be op B. The estimated total current costs for closure and postc reevaluated at the end of each fiscal year divided by th number of years the landfill will be operated. C. A portion of the estimated total current costs for closur MSWLF, determined at the time the landfill is placed in to the ratio of landfill used during the year to its total ca D. A portion of the estimated total current costs for closur MSWLF, as reevaluated at the end of the fiscal year, e landfill used during the year to its total capacity. 69. Under utility regulatory accounting principles (RAP), the account "Utility Plant Acquisition Adjustment" reflects A. The difference b for utility plant a paid by the utilit plant into public accumulated de B. The difference between the fair market value of the uti paid for it, less accumulated depreciation. C. The difference between the amount paid for the utility replacement cost. D. The difference between the amount paid for the utility value of its tangible plant assets. 70. The liability for general obligation bonds issued for the benefit of a governmentally owned electric utility and serviced by its earnings should be recorded in A. An enterprise fund. B. An enterprise fund and disclosed in the notes to the fin statements. C. An enterprise fund and the business-like activities accounts. D. The governmental activities accounts. 71. Sales revenues of a utility for a certain fiscal period A. Are equivalent to to Customer Accounts that period. B. Include receivables billed during a fiscal period, plus re the next year if meters were read before year-end. C. Should be reported on the cash basis for the sake of conservatism. D. Include billed receivables and an accrual for unbilled r balance sheet date. 72. For which of the following assets can the "modified approach" be elected in lieu of depreciation? A. Eligible infrastructure assets. B. All general capital assets. C. Buildings and equipment. D. All capital assets. 73. The Capitol City Golf Course, an enterprise fund, purchased new furniture for use in the golf pro's office. The debit for the entry to record the event should be to A. Expen ditures. B. Purchase s. C. Furniture and fixtures. D. General capital assets. 74. Which of the following accounts would least likely be found in the general ledger of an internal service fund? A. Ca sh. B. Expenditure s. C. Billings to Departments. D. Machinery and equipment. 75. Which of the following would be reflected in the operating statement of a proprietary fund? A. Incurrence of interest expense. B. Repayment of the principal of debt. C. Issuance of debt. D. Purchase of a capital asset. 76. How should financial information for internal service funds be reported in the government-wide financial statements? A. As part of governmental activities. B. As part of business-type activities. C. Amounts allocated proportionately between governme activities. D. Usually as part of governmental activities, unless the i predominantly serves one or more enterprise funds. 77. Primarily, the operating statement of a proprietary fund should provide information useful in answering which of the following questions? A. What are the tra the period that h decreased the r spending in the B. Have current financial resources increased or decreas period? C. Have cash balances increased or decreased as a resu events of the period? D. What are the transactions or events of the period that decreased the fund's total economic resources? Short Answer Questions 78. The following are key terms in Chapter 7 that relate accounting for the businesstype activities of state and local governments: A. Customer advances for construction B. Revenue bonds C. Utility plant acquisition adjustment D. Regulatory accounting principles E. Original cost F. Historical cost G. General obligation bonds For each of the following definitions, indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition. Essay Questions 79. "In order to determine whether user charges are commensurate with operating costs, it is desirable for internal service fund operations to be accounted for on a business basis." Do you agree? Why or why not? 80. Legislators often believe an internal service fund function will not be subjected to annual legislative budget review and the legislature will \"lose control\" of the fund. Do you agree with this line of reasoning? Why or why not? 81. Explain how governmental entities that use internal service funds to account for risk financing and risk management activities should account for those activities. 82. "Enterprise funds should not be permitted to accumulate unrestricted net position, since to do so would indicate overpricing of its services." Do you agree? Why or why not? 83. Enterprise funds for utilities often report in their operating statement an "Allowance for Funds Used During Construction (AFUDC)" for interest paid or imputed during construction of plant assets. What purposes are served by reporting AFUDC in the manner described? 84. In some local government financial reports you will find activities such as solid waste disposal and sewage disposal accounted for as a part of the General Fund. In other reports apparently identical activities are accounted for as enterprise funds. Under what conditions would each treatment be proper? 85. How does GASB reporting of uncollectible accounts for governmental funds and proprietary funds differ from the reporting of uncollectible accounts under FASB standards? 86. A government provided original financing for its supplies fund by a transfer of $40,000 cash from the General Fund. The transferee fund credited the amount to Interfund Loan from General FundNoncurrent. Assuming that the terminology is correct, how should the transfer be classified in the statements of the supplies fund? Suggest an appropriate name for the corresponding account in the General Fund; how should the corresponding account be shown in the statements of the General Fund? 87. Explain how capitalization of interest costs differs for enterprise funds as opposed to governmental funds. 88. What are the alternative methods of dissolving an internal service fund? What factors should be considered in choosing the appropriate method? 89. What factors should be considered in determining whether an activity or operation should be accounted for as an enterprise fund or as a governmental fund? As an internal service fund? 90. For items reported in the restricted assets section of an enterprise fund balance sheet, how are the related items reported in the liability and fund equity sections of the balance sheet? 91. "Reporting 'utility plant in service' as a single line on the balance sheet provides adequate information for regulatory purposes and/or sound management." Do you agree with the statement? Explain why or why not. 92. The Motor Vehicle Repair Fund of Laramee County provides centralized repair for county-owned vehicles. For the following summarized transactions and events for the year ended June 30, provide the fund level entries in general journal form required to conform to generally accepted accounting principles. If no entry is needed, so indicate. 1) The Motor Vehicle Repair Fund ordered supplies at an estimated cost of $92,000. 2) The supplies ordered in (1) above were received at invoice costs of $91,400; these invoices were approved for payment. 3) Supplies costing $800 were used to repair a police car, and the Motor Vehicle Repair Fund billed to the General Fund at a markup of 20 percent on cost. 4) Expenses paid in cash during the year were: purchasing, $5,700; warehousing, $7,100; and general and administrative, $6,200. 93. The Supplies Fund, an internal service fund, of a certain city recorded the following journal entry: In the entry above, explain the difference between the accounts "Interfund Loan from Water Utility Fund" and "Interfund Transfer In from General Fund." 94. On July 1, the first day of its fiscal year, Yale Township issued bonds with a face value of $1,000,000 at 102 percent of par on the date of issue. The bonds bear annual interest at 6 percent; interest is payable semiannually. The bonds will mature in equal annual installments over 20 years. Bond premium must be used for eventual bond redemption and is recorded as a restricted asset. Assuming the bonds are revenue bonds sold to finance the construction of a parking garage to be operated in a manner similar to an investor-owned business: 1) Name the type of fund in which each of the following should be recorded. (If any of the following should not be recorded at all, enter "none" on the appropriate line.) (a) The cash received for the sale of the bonds (b) The liability of $1,000,000 for bonds payable (c) The cost of the parking garage (d) Interest paid or accrued during the period of construction 2) Show in general journal form all entries that should be made to record the sale of the bonds. For each entry indicate the fund in which the entry is made. Chapter 07 Accounting for the Business-type Activities of State and Local Governments Answer Key True / False Questions 1. For proprietary funds, governments generally present a statement of net position in a format that displays assets, plus deferred outflows of resources, less liabilities, less deferred inflows of resources, equals net position. TRUE This sentence describes the nature of a proprietary fund statement of net position. Difficulty: Easy Question Type: Concept 2. Internal service funds of one government may not provide goods or services, on a cost-reimbursement basis, to other governments. FALSE The definition of internal service funds quoted in the text is to provide for service to other governments as well as to other departments or agencies of the unit operating the internal service fund. While internal service funds exist primarily to provide goods and services to other departments and agencies of the same government, there is no prohibition to providing the goods or services to other governments as well. Difficulty: Easy Question Type: Concept 3. Revenues of internal service funds should be recognized only when they are expected to be available in time to pay current liabilities of the fund. FALSE Revenues of internal service funds should be recognized on the accrual basis: when earned, without regard to when they will be available to pay current liabilities of the fund. Difficulty: Medium Question Type: Concept 4. Internal service funds should account for operating expenditures on the accrual basis. FALSE This question requires careful reading. Internal service funds account for expenses, not expenditures, and use the accrual basis. Difficulty: Medium Question Type: Concept 5. Internal service funds account within the fund for any long-term liabilities to be serviced from revenue derived from fund operations. TRUE Since the internal service fund uses accrual accounting, it recognizes any longterm liabilities of the fund. Long-term liabilities of an internal service fund ordinarily result from advances from other funds or governments, not from outside creditors. Difficulty: Easy Question Type: Concept 6. Internal service funds should not account for depreciation of capital assets used in their operations, since this would, in effect, charge the government twice for the same assets. FALSE As for a business enterprise, including a depreciation charge is necessary to determine the full cost of services. Difficulty: Medium Question Type: Concept 7. Internal service funds are intended to operate on taxes or other financing sources authorized by the legally enacted revenue budget for each year; therefore, they are classified as governmental funds. FALSE Internal service funds and enterprise funds are intended to cover operating costs on a continuing basis and ordinarily obtain their revenues from user charges, not taxes or other financing sources provided for by an annual budget; therefore, these are both proprietary, not governmental, funds. However, under GASB standards, internal service funds are reported as governmental activities, not business-like activities, on the government-wide statements if they primarily serve other governmental departments or functions. Difficulty: Medium Question Type: Concept 8. The net position of an internal service fund consists of contributed equity and reserves for assets that will not be converted into cash in the normal operation of the fund. FALSE Under GASB standards, net position is classified into the three categories of net investment in capital assets, restricted, and unrestricted. Difficulty: Easy Question Type: Concept 9. In the information for the Supplies Fund that follows, the account "Interfund Loan from Electric Utility Fund" should be credited for $320,000 because this amount was borrowed from and will have to be repaid by the Supplies Fund. TRUE Loan is the term described in GASB standards for such transactions. Interfund loans should be properly classified as current or noncurrent receivables or payables. Difficulty: Medium Question Type: Journal Entry 10. In the information for the Supplies Fund that follows, the account "Interfund Transfer In from General Fund" should be credited for $89,200 because this amount was transferred from the General Fund to the Supplies Fund in a nonexchange transfer that will not have to be repaid. TRUE "Interfund Transfer In" is a temporary account that will be closed to Net Position Unrestricted at year-end. Difficulty: Medium Question Type: Journal Entry 11. The Encumbrances account should be used by an internal service fund in the same manner as by the General Fund. FALSE Internal service funds do not incorporate budgetary accounts with proprietary accounts. Memorandum records of purchase orders and contracts should be kept, however, for management control purposes. Difficulty: Easy Question Type: Concept 12. Proprietary funds are accounted for in a manner similar to investor-owned businesses; among other features, the accrual basis of accounting is used and all of the capital assets used in fund operations are accounted for by the using fund. TRUE The features described are characteristic of GAAP applicable to proprietary funds. Difficulty: Easy Question Type: Concept 13. Internal balances between governmental and business-type activities are reported in the government-wide statements. TRUE GASB standards require that interfund receivables and payables between governmental and business-type activities be presented as internal balances. While internal balances do not meet the definition of elements of financial statements, they are reported in the government-wide statement of net position for purposes of fairly presenting each reporting entity. Difficulty: Medium Question Type: Concept 14. Capital assets acquired under a capital lease for use by an internal service fund should be recorded in the General Fund in order to report all leased assets in one financial statement. FALSE All capital assets used by an internal service fund, regardless of source, should be recorded in the accounts of that fund. Difficulty: Easy Question Type: Concept 15. A statement of revenues, expenses, and changes in net position for an internal service fund is similar in many respects to an income statement prepared for an investor-owned business. TRUE The terminology differs somewhat, but otherwise the statement is similar in format and display to income statements prepared for business organizations. Difficulty: Easy Question Type: Concept 16. A statement of cash flows is not prepared for an internal service fund. FALSE GASB standards require that a statement of cash flows be prepared for proprietary funds. However, this statement is not required for governmental fund types. Difficulty: Easy Question Type: Concept 17. An internal service fund can be liquidated only if there is a ready and willing buyer for the fund's assets. FALSE The text suggests three ways, or combinations thereof, in which liquidation of an internal service fund may be accomplished. Even if there is no external buyer for the fund's assets, the fund could be dissolved by either distributing the fund's assets in kind to other funds or by simply making the fund a department of another fund. Difficulty: Medium Question Type: Concept 18. Public utilities owned and operated by governments are common examples of enterprise funds. TRUE A government may operate almost any kind of enterprise, but public utilities are the most common examples. Difficulty: Easy Question Type: Concept 19. Enterprise funds are used by state and local governments to account for services that are provided to the general public on a user-charge basis, with prices set to recover the costs of operations, activities financed with debt secured solely by revenues from fees of the activity, activities required by law or regulations to recover operating costs from user charges, or any activity that the governing body of the government has decided should be accounted for on a "business basis." TRUE Even if user charges are not the primary source of revenues, the enterprise fund approach may be used for any activities for which the governing body desires periodic determination of revenues earned, expenses incurred, and/or net income. Difficulty: Medium Question Type: Concept 20. The liability for utility revenue bonds should be reported in business-type activities on the government-wide statements, as well as in the enterprise fund. TRUE Utility revenue bonds, for which interest and principal are to be paid from revenues of the enterprise fund, are a liability of that fund and should be so reported. They should also appear as long-term liabilities of business-type activities on the government-wide statement of financial position. Difficulty: Easy Question Type: Concept 21. Budgets for enterprise funds should be recorded in the accounts in the same manner as budgets for a General Fund or a special revenue fund. FALSE Budgets for enterprise funds are prepared to assist management in the efficient use of resources and normally are not legally binding documents. Consequently, GASB standards do not require or recommend that budgets be recorded in the accounts of an enterprise fund. (However, in jurisdictions in which enterprise funds are required by law to prepare budgets it may be desirable to integrate budgetary accounts with proprietary accounts. Only the proprietary account balances should be reported in the basic financial statements, however.) Difficulty: Easy Question Type: Concept 22. Unbilled customer accounts receivable should be reflected in the balance sheet of a governmentally owned utility even though the exact amount of service to be billed is unknown until the customers' meters can be read. TRUE Unbilled receivables represent revenues that have been earned and therefore should be reported in the current period. These receivables/revenues should be estimated as accurately as possible using projections based on past usage patterns for the same customers or recent usage patterns for other customers who have been billed. Difficulty: Medium Question Type: Concept 23. General obligation bonds used to increase the capacity of a water treatment plant (part of a water utility enterprise fund), but for which the debt service (including repayment of principal) will be paid from general government revenues should be reported as a long-term liability in the water utility fund balance sheet. FALSE Since water utility revenues will not be used for debt service on these bonds, the liability must be reported in the governmental activities financial statements. However, the enterprise fund should report a contribution from the General Fund (assumed) in the amount of the bond proceeds used for the water treatment plant. Difficulty: Medium Question Type: Concept 24. Interest and principal on enterprise fund revenue bonds should be recorded in a debt service fund until paid. FALSE Debt service for revenue bonds is paid from the revenues of the enterprise fund and therefore should be accounted for by that fund. Difficulty: Medium Question Type: Concept 25. Governments can follow either the GASB or FASB Codification. FALSE GASB issued GASBS 62 which officially incorporated applicable private sector guidance from FASB and AICPA pronouncements into the GASB codification. Additional accounting guidance, such as FASB statements issued after 2010 or industry-specific guidance, is considered \"other accounting literature,\" as defined in GASB Codification, Section 1000, pars. 103 and 104, and may be followed by governments as long as they do not conflict with or contradict GASB pronouncements. Difficulty: Medium Question Type: Concept 26. The liability for long-term debt issued to provide financing for an enterprise fund and to be serviced from revenues of the enterprise fund should be reported in the financial statements of the enterprise fund, even though the debt also is backed by the general obligation credit of the government. TRUE Although the liability should be reported as a liability of the enterprise fund, the fact that it is secondarily a general obligation must be disclosed as a contingent liability in the notes to the financial statements. Difficulty: Medium Question Type: Concept 27. Utility enterprise funds that report to regulatory agencies may capitalize both actual interest paid on debt incurred for construction of plant assets and an imputed amount on their own funds so used. TRUE Utilities that report to regulatory agencies are usually allowed to capitalize both the net cost for the period of construction of borrowed funds and a reasonable imputed rate on other funds so used. FASB standards also permit such capitalization by regulated entities, providing that imputed amounts capitalized are allowed to be recovered through rates charged to customers, and it is probable that all capitalized costs will be recovered through future revenues. Difficulty: Medium Question Type: Concept 28. In the context of regulatory utility plant accounting, original cost and historical cost have the same meaning. FALSE In the context of regulatory utility enterprise accounting, original cost is the cost to the owner who first devoted the property to public service, whereas historical cost is simply the acquisition cost to the current owner. Difficulty: Medium Question Type: Concept 29. The amount of expense and liability to be reported each period for the closure and postclosure costs of a municipal solid waste landfill (MSWLF) is proportional to the amount of landfill capacity used during the period. TRUE As indicated in Chapter 7, the cost estimation procedures to estimate total closure and postclosure costs are beyond the scope of this text (and course). However, once those costs have been estimated, an expense and liability should be recognized in an amount proportional to the ratio of landfill usage for the period to total landfill capacity. Difficulty: Medium Question Type: Concept 30. The balance sheet format recommended for financial statements submitted to the NARUC and FERC for utilities subject to regulatory reporting requirements displays Utility Plant before Current and Accrued Assets and Long-Term Debt before Current and Accrued Liabilities. TRUE Utility plant and long-term debt ordinarily amount to a much greater percentage of total assets and total long-term debt than does the total of current and accrued assets and liabilities, respectively. It is therefore considered more informative to present the noncurrent items first. Difficulty: Medium Question Type: Concept 31. GASB requires interest capitalization for self-constructed assets of proprietary funds, except those constructed with general long-term debt that will be repaid from resources of governmental activities. TRUE Unlike self-constructed general capital assets, GASB requires interest capitalization for self-constructed assets of proprietary funds, except those constructed with general long-term debt that will be repaid from resources of governmental activities. Difficulty: Medium Question Type: Concept 32. To facilitate the combination of utility financial statements with the statements of other enterprise funds, GAAP permits utilities to follow the customary format used by nonutility business organizations. TRUE Statements in the regulatory format cannot easily be combined with statements in the usual nonutility format used for other fund types; therefore, governments that follow GAAP generally use the nonregulatory, conventional format for utility enterprise fund balance sheets. Difficulty: Medium Question Type: Concept 33. Premiums or discounts on bonds payable issued by enterprise funds should be accounted for in the same manner as those of a comparable business entity. TRUE Under GASB standards, premiums or discounts on bonds issued by enterprise funds should be amortized in the same manner as if the bonds were business organizations. Difficulty: Medium Question Type: Concept 34. Plant and equipment utilized by a governmentally owned utility should be depreciated in the same manner as if it belonged to an investor-owned utility. TRUE Accounting for governmentally owned enterprises should be comparable with that of investor-owned enterprises in the same industry. Difficulty: Medium Question Type: Concept Multiple Choice Questions 35. Which of the following may properly be reported as a component of net position in the proprietary fund statement of net position? A. Retained earnings. B. Designated equity. C. Restricted net position. D. Contributed capital. Difficulty: Easy Question Type: Concept 36. Which of the following properly portrays the components of net position for proprietary funds? A. Net investment in capital assets, Reserved, Unreserved. B. Designated, Undesignated, Restricted, Unrestricted. C. Net investment in capital assets, Restricted, Unrestricted. D. Contributed capital, Net investment in capital assets, R Unreserved. Difficulty: Easy Question Type: Concept 37. Which of the following funds of a government uses the same basis of accounting as a proprietary fund? A. Perman ent trust. B. Investment trust fund. C. Special revenue. D. Capital projects. Difficulty: Medium Question Type: Concept 38. Internal service funds should be used only if A. The reporting governm predominant participan activity. B. The reporting government provides services primarily participants. C. The reporting government provides services primarily of the same government. D. The reporting government provides services to other d charge that covers the full cost of operations. Difficulty: Easy Question Type: Concept 39. In which of the following funds is it appropriate to record depreciation of capital assets? A. Internal service fund. B. Permanent fund. C. General fund. D. Capital projects fund. Difficulty: Easy Question Type: Concept 40. Which of the following is a difference between enterprise funds and internal service funds? A. The use of cost acco enterprise funds but service funds. B. The customers who primarily benefit from the fund's service. C. The number of basic financial statements required. D. The measurement focus on economic resources for e current financial resources for internal service funds. Difficulty: Easy Question Type: Concept 41. Depreciation on capital assets used by an enterprise fund of a government A. Should not be recorded for infrastructure assets. B. Should be recorded in the General Fund as an expenditure. C. Should be recorded in the governmental activities accounts. D. Should be recorded in the enterprise fund as an expense. Difficulty: Easy Question Type: Concept 42. The comprehensive annual financial report (CAFR) of a government should contain a statement of revenues, expenses, and changes in net position for A. Both proprietary and governmental funds. B. Proprietary but not governmental funds. C. Governmental but not proprietary funds. D. Proprietary and fiduciary funds. Difficulty: Medium Question type: Essay 43. Which of the following activities or services would most likely not be accounted for by an internal service fund? A. Electronic data processing. B. Central purchasing, warehousing, and issuing of supplies. C. Municipal golf course. D. Risk management. Difficulty: Medium Question Type: Concept 44. When a supplies internal service fund records a billing to the General Fund, the journal entry in the internal service fund will include A. A debit to Cost of Supplies Issued. B. A debit to Loans Receivable. C. A debit to Billings to Department. D. A debit to Inventory of Supplies. Difficulty: Medium Question Type: Journal Entry 45. When a supplies internal service fund records a billing to the General Fund, the journal entry in the General Fund will include A. A debit to Cost of Supplies Issued. B. A credit to Interfund Loans Payable. C. A debit to Expenditures. D. A credit to Billings to Department. Difficulty: Medium Question Type: Concept 46. Which of the following is not true regarding proprietary funds? A. The difference be liabilities of propr "fund balance." B. Proprietary funds record long-term debt directly in the accounts. C. Proprietary funds record capital assets directly in the f accounts. D. Proprietary funds present a statement of cash flows. Difficulty: Medium Question type: Essay 47. Which of the following is (are) an appropriate basis of accounting for an internal service fund? A. Modified accrual basis: Yes; accrual basis: No B. Modified accrual basis: No; accrual basis: Yes C. Modified accrual basis: Yes; accrual basis: Yes D. Modified accrual basis: No; accrual basis: No Difficulty: Easy Question Type: Concept 48. Which of the following funds of a government would account for depreciation in the accounts of the fund? A. Gen eral. B. Internal service. C. Capital projects. D. Special revenue. Difficulty: Easy Question Type: Concept 49. An internal service fund normally uses which of the following budgetary accounts? A. Estimated Revenues. B. Appropriation s. C. Encumbranc es. D. An internal service fund normally does not use budget accounts. Difficulty: Easy Question Type: Concept 50. Under GASB standards, an internal service fund should prepare all of the following financial statements except for a A. Statement of revenues, expenditures, and change fund balance. B. Statement of revenues, expenses, and changes in net position. C. Statement of net position. D. Statement of cash flows. Difficulty: Medium Question Type: Concept 51. In order to conform to GASB standards, goods and services provided by internal service funds to other departments of the government must be priced to A. Cover variable costs only. B. Cover full costs (both fixed and variable). C. Cover full costs, plus an additional charge to cover inf needs for expansion. D. GASB standards do not address appropriate fees. Eac determines its own operating and pricing policies, whic subsidizing the cost of operating an internal service fu Difficulty: Medium Question Type: Concept 52. What amount of the following items should be accounted for in an internal service fund? A. $2,10 0,000. B. $1,760,00 0. C. $1,640,00 0. D. $350,00 0. Difficulty: Medium Question Type: Calculation 53. What amount of the following items should be accounted for in an enterprise fund? A. $2,10 0,000. B. $1,760,00 0. C. $1,640,00 0. D. $350,00 0. Difficulty: Medium Question Type: Calculation 54. To establish a new internal service fund with a transfer of funds (not to be repaid), which account would be credited in the internal service fund? A. Ca sh. B. Interfund Transfer In. C. Interfund Transfer Out. D. Estimated Revenues. Difficulty: Medium Question Type: Concept 55. The City of Jennings operates a central motor pool as an internal service fund for the benefit of the city's other funds and departments. In the current year, this fund billed the Community Services Department $30,000 for vehicle rentals. What account should the internal service fund use to record these billings? A. Interfund Transfers In. B. Interfund Exchanges. C. Billings to Departments. D. Cost of Providing Rentals to Other Funds and Units. Difficulty: Medium Question Type: Journal Entry 56. When utility customers are billed during the year, the enterprise fund journal entry will include A. A debit to Sales of Water. B. A debit to Cash Restricted. C. A debit to Customer Accounts Receivable. D. All of the above. Difficulty: Medium Question Type: Journal Entry 57. When a new utility customer submits a deposit, the enterprise fund journal entry will include A. A credit to Customer Deposits. B. A debit to Customer Deposits. C. A debit to Sales of Water. D. A credit to Sales of Water. Difficulty: Medium Question Type: Journal Entry 58. GASB accounting and financial reporting standards for risk financing activities provide that an internal service fund should recognize claims expense and a related liability when a claim has been asserted and A. A municipal cour judgment to a cla General Fund). B. It is reasonably possible that a loss has been incurred be reasonably estimated. C. It is probable that a loss has been incurred and the am reasonably estimated. D. A loss has been incurred, but the amount cannot be re estimated. Difficulty: Medium Question Type: Concept 59. Which of the following is not a typical means of dissolving an internal service fund that a city no longer needs or wants? A. Conversion of the assets to cash an cash to another f B. Transfer the fund's assets to another fund that will con similar operating activities. C. Distribute the fund's assets in kind to another fund or f continue the same or similar operating activities. D. Transfer the fund's assets to a not-for-profit organizati charitable services in the community. Difficulty: Medium Question Type: Concept 60. Which of the following account balances would only be reported if a city-owned utility followed regulatory accounting principles? A. Depreciatio n expense. B. Pumping expense. C. Restricted Assets Cash. D. Utility Plant Acquisition Adjustments. Difficulty: Medium Question Type: Concept 61. 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? A. Internal service. B. Private-purpose trust fund. C. Enterpris e. D. Special revenue. Difficulty: Medium Question Type: Concept 62. Which of the following organizations or units would least likely be accounted for by an enterprise fund? A. A hospit al. B. An airport. C. The computer department. D. A sports stadium. Difficulty: Easy Question Type: Concept 63. Which of the following accounts would appropriately be included on an enterprise fund balance sheet? A. Fund Balance: No; Net PositionUnrestricted: Yes B. Fund Balance: Yes; Net Position Unrestricted: No C. Fund Balance: No; Net Position Unrestricted: No D. Fund Balance: Yes; Net PositionUnrestricted: Yes Difficulty: Easy Question Type: Concept 64. The water utility fund of the City of Pikesville uses cycle billing procedures. Under these procedures, the City of Pikesville will likely do which of the following on December 31, the end of its fiscal year? A. Read meters and bill all customers on December 31. B. Accrue revenue and a receivable for the number of da date for each customer until December 31. C. Ignore water consumed by customers from their last b December 31. D. Call the unbilled customers and request that they read meters. Difficulty: Medium Question Type: Concept 65. The following cash transactions were among those reported by Crawford County's Water and Sewer Enterprise Fund for the year: In the Water and Sewer Enterprise Fund's statement of cash flows for the year ended December 31, what amount should be reported as cash flows from capital and related financing activities? A. $5,00 0,000. B. $6,000,00 0. C. $8,000,00 0. D. $9,000,00 0. Difficulty: Hard Question Type: Calculation 66. Which of the following is not a true statement about the Allowance for Funds Used During Construction (AFUDC)? A. AFUDC may have either component or an equity component. B. The amount credited to AFUDC may exceed the amou during the period on bonds issued for construction. C. AFUDC may be credited for an imputed amount of inte own funds used for construction. D. AFUDC may include the total amount of borrowing du construction. Difficulty: Medium Question Type: Concept 67. Which of the following items is not required to be included in the segment information that must be reported for a municipality's enterprise funds? A. Material enterprise fund capital assets. B. Material enterprise fund operating income or loss. C. Material enterprise fund tax revenues. D. Material intergovernmental operating subsidies to an enterprise fund. Difficulty: Medium Question Type: Concept 68. A municipal solid waste landfill (MSWLF) accounted for by an enterprise fund should recognize an expense and liability for the year in the amount of A. The estimated to closure and post determined at the placed into initial the estimated nu landfill will be ope B. The estimated total current costs for closure and postc as reevaluated at the end of each fiscal year divided b estimated number of years the landfill will be operated C. A portion of the estimated total current costs for closur the MSWLF, determined at the time the landfill is place equal to the ratio of landfill used during the year to its D. A portion of the estimated total current costs for closur the MSWLF, as reevaluated at the end of the fiscal ye landfill used during the year to its total capacity. Difficulty: Medium Question Type: Concept 69. Under utility regulatory accounting principles (RAP), the account "Utility Plant Acquisition Adjustment" reflects A. The difference be paid for utility pla originally paid by placed the plant less accumulated B. The difference between the fair market value of the ut amount paid for it, less accumulated depreciation. C. The difference between the amount paid for the utility replacement cost. D. The difference between the amount paid for the utility market value of its tangible plant assets. Difficulty: Hard Question Type: Concept 70. The liability for general obligation bonds issued for the benefit of a governmentally owned electric utility and serviced by its earnings should be recorded in A. An enterprise fund. B. An enterprise fund and disclosed in the notes to the fin statements. C. An enterprise fund and the business-like activities accounts. D. The governmental activities accounts. Difficulty: Medium Question Type: Concept 71. Sales revenues of a utility for a certain fiscal period A. Are equivalent to to Customer Accounts that period. B. Include receivables billed during a fiscal period, plus r in the next year if meters were read before year-end. C. Should be reported on the cash basis for the sake of conservatism. D. Include billed receivables and an accrual for unbilled r balance sheet date. Difficulty: Medium Question Type: Concept 72. For which of the following assets can the "modified approach" be elected in lieu of depreciation? A. Eligible infrastructure assets. B. All general capital assets. C. Buildings and equipment. D. All capital assets. Difficulty: Easy Question Type: Concept 73. The Capitol City Golf Course, an enterprise fund, purchased new furniture for use in the golf pro's office. The debit for the entry to record the event should be to A. Expend itures. B. Purchase s. C. Furniture and fixtures. D. General capital assets. Difficulty: Easy Question Type: Concept 74. Which of the following accounts would least likely be found in the general ledger of an internal service fund? A. Ca sh. B. Expenditure s. C. Billings to Departments. D. Machinery and equipment. Difficulty: Easy Question Type: Concept 75. Which of the following would be reflected in the operating statement of a proprietary fund? A. Incurrence of interest expense. B. Repayment of the principal of debt. C. Issuance of debt. D. Purchase of a capital asset. Difficulty: Medium Question Type: Concept 76. How should financial information for internal service funds be reported in the government-wide financial statements? A. As part of governmental activities. B. As part of business-type activities. C. Amounts allocated proportionately between governme type activities. D. Usually as part of governmental activities, unless the i predominantly serves one or more enterprise funds. Difficulty: Medium Question Type: Concept 77. Primarily, the operating statement of a proprietary fund should provide information useful in answering which of the following questions? A. What are the tran the period that ha decreased the re spending in the n B. Have current financial resources increased or decreas period? C. Have cash balances increased or decreased as a resu events of the period? D. What are the transactions or events of the period that decreased the fund's total economic resources? Difficulty: Medium Question Type: Concept Short Answer Questions 78. The following are key terms in Chapter 7 that relate accounting for the business-type activities of state and local governments: A. Customer advances for construction B. Revenue bonds C. Utility plant acquisition adjustment D. Regulatory accounting principles E. Original cost F. Historical cost G. General obligation bonds For each of the following definitions, indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition. 1. E, 2. D, 3. B, 4. A, 5. C Difficulty: Medium Question Type: Concept Essay Questions 79. "In order to determine whether user charges are commensurate with operating costs, it is desirable for internal service fund operations to be accounted for on a business basis." Do you agree? Why or why not? Agree. Internal service funds should be operated on a cost recovery basis (although, in practice, not all are). Accrual accounting (i.e., the "business basis") is required for these funds to determine that user charges are commensurate with operating costs, including depreciation on capital assets. Difficulty: Medium Question Type: Concept 80. Legislators often believe an internal service fund function will not be subjected to annual legislative budget review and the legislature will \"lose control\" of the fund. Do you agree with this line of reasoning? Why or why not? Difficulty: Medium Question Type: Concept 81. Explain how governmental entities that use internal service funds to account for risk financing and risk management activities should account for those activities. Difficulty: Medium Question Type: Concept 82. "Enterprise funds should not be permitted to accumulate unrestricted net position, since to do so would indicate overpricing of its services." Do you agree? Why or why not? Difficulty: Medium Question Type: Concept 83. Enterprise funds for utilities often report in their operating statement an "Allowance for Funds Used During Construction (AFUDC)" for interest paid or imputed during construction of plant assets. What purposes are served by reporting AFUDC in the manner described? Difficulty: Medium Question Type: Concept 84. In some local government financial reports you will find activities such as solid waste disposal and sewage disposal accounted for as a part of the General Fund. In other reports apparently identical activities are accounted for as enterprise funds. Under what conditions would each treatment be proper? Difficulty: Medium Question Type: Concept 85. How does GASB reporting of uncollectible accounts for governmental funds and proprietary funds differ from the reporting of uncollectible accounts under FASB standards? Difficulty: Medium Question Type: Concept 86. A government provided original financing for its supplies fund by a transfer of $40,000 cash from the General Fund. The transferee fund credited the amount to Interfund Loan from General FundNoncurrent. Assuming that the terminology is correct, how should the transfer be classified in the statements of the supplies fund? Suggest an appropriate name for the corresponding account in the General Fund; how should the corresponding account be shown in the statements of the General Fund? Difficulty: Medium Question Type: Concept 87. Explain how capitalization of interest costs differs for enterprise funds as opposed to governmental funds. Difficulty: Medium Question Type: Concept 88. What are the alternative methods of dissolving an internal service fund? What factors should be considered in choosing the appropriate method? Difficulty: Medium Question Type: Concept 89. What factors should be considered in determining whether an activity or operation should be accounted for as an enterprise fund or as a governmental fund? As an internal service fund? Difficulty: Medium Question Type: Analysis 90. For items reported in the restricted assets section of an enterprise fund balance sheet, how are the related items reported in the liability and fund equity sections of the balance sheet? Difficulty: Medium Question Type: Concept 91. "Reporting 'utility plant in service' as a single line on the balance sheet provides adequate information for regulatory purposes and/or sound management." Do you agree with the statement? Explain why or why not. Difficulty: Medium Question Type: Concept 92. The Motor Vehicle Repair Fund of Laramee County provides centralized repair for county-owned vehicles. For the following summarized transactions and events for the year ended June 30, provide the fund level entries in general journal form required to conform to generally accepted accounting principles. If no entry is needed, so indicate. 1) The Motor Vehicle Repair Fund ordered supplies at an estimated cost of $92,000. 2) The supplies ordered in (1) above were received at invoice costs of $91,400; these invoices were approved for payment. 3) Supplies costing $800 were used to repair a police car, and the Motor Vehicle Repair Fund billed to the General Fund at a markup of 20 percent on cost. 4) Expenses paid in cash during the year were: purchasing, $5,700; warehousing, $7,100; and general and administrative, $6,200. Difficulty: Medium Question Type: Journal Entry 93. The Supplies Fund, an internal service fund, of a certain city recorded the following journal entry: In the entry above, explain the difference between the accounts "Interfund Loan from Water Utility Fund" and "Interfund Transfer In from General Fund." Difficulty: Medium Question Type: Analysis 94. On July 1, the first day of its fiscal year, Yale Township issued bonds with a face value of $1,000,000 at 102 percent of par on the date of issue. The bonds bear annual interest at 6 percent; interest is payable semiannually. The bonds will mature in equal annual installments over 20 years. Bond premium must be used for eventual bond redemption and is recorded as a restricted asset. Assuming the bonds are revenue bonds sold to finance the construction of a parking garage to be operated in a manner similar to an investor-owned business: 1) Name the type of fund in which each of the following should be recorded. (If any of the following should not be recorded at all, enter "none" on the appropriate line.) (a) The cash received for the sale of the bonds (b) The liability of $1,000,000 for bonds payable (c) The cost of the parking garage (d) Interest paid or accrued during the period of construction 2) Show in general journal form all entries that should be made to record the sale of the bonds. For each entry indicate the fund in which the entry is made. 1) (a) Enterprise Fund. (b) Enterprise Fund. (c) Enterprise Fund. (d) Enterprise Fund. (Net interest cost during construction should be capitalized.) 2) Difficulty: Hard Question Type: Journal Entry Chapter 06 Accounting for General Long-term Liabilities and Debt Service True / False Questions 1. General long-term liabilities are those that arise from the activities of a government. True False 2. Although some governments have issued taxable debt, the interest earned on most debt issued by state and loca