Multiple Choice

1.In what way do Internal Service Funds differ from Enterprise Funds? the basis of accounting that they use the nature of the entities to which they supply goods or services the measurement focus that they use the kinds of financial statements that they prepare

2.A school district wants to establish a separate fund to acquire, store, and sell school supplies to individual schools within the district. What type of fund should it use?

a.enterprise fund fund

c.internal service fund

d.public-purpose trust fund

3.To achieve the pricing objective of an Internal Service Fund, which measurement focus and basis of accounting must be used? measurement focus and cash basis of accounting

b.current financial resources measurement focus and full accrual basis of accounting

c.economic resources measurement focus and modified accrual basis of accounting

d.economic resources measurement focus and full accrual basis of accounting

4.A proprietary fund statement of net position report assets and liabilities in what format?

a.relative order of liquidity

b.classified (current/noncurrent) asset/liability type

d.separating capital assets and related debt for other assets and liabilities

5.Which of the following activities is most likely to be accounted for in an Internal Service Fund?

a.operation of the municipal parks and cultural centers of printing services to all departments in the municipality of electricity services to the municipality’s residents

d.accumulation of resources to pay pension benefits to municipal employees

6.In establishing prices for its services, which of the following practices is the least appropriate for an Internal Service Fund?

a.price at less than cost

b.price at cost only

c.price at cost plus an amount for anticipated inflation of equipment costs

d.price at cost plus an amount for depreciation of equipment purchased with a transfer of cash from the General Fund

7.The General Fund transfers $500,000 to a Printing Internal Service Fund, which the Internal Service Fund uses to acquire machinery. How should the Internal Service Fund account for the cost of acquiring and using the equipment?

a.record the acquisition cost as an expenditure and ignore any depreciation

b.record the acquisition cost as an asset and depreciate it over its estimated useful life

c.record the acquisition cost as an asset, credit investment in capital assets, do not depreciate the asset, and write off the entire asset when it is disposed of

d.record the acquisition cost as an expenditure of the General Fund

8.When an Internal Service Fund sends a bill to the General Fund, which account should the Internal Service Fund debit?

a.expenditures – vehicle usage

b.transfer out to the general fund

c.revenues – vehicle charges

d.due from general fund

9.A city’s Water and Sewer Enterprise Fund should include which of the following components in its statement of net position?

a.only assets, liabilities, and net position

b.assets, deferred outflows, liabilities, deferred inflows, and net position

c.assets, deferred outflows, liabilities, deferred inflows, and retained earnings

d.assets, liabilities, and retained earnings

10.A city’s General Fund makes a contribution of $800,000 to an Internal Service Fund (ISF) so that the ISF can operate. How should the ISF report the contribution? operating revenue nonoperating revenue a transfer after operating income but before change in net position a direct addition to fund net position

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