Multiple-Choice Questions on Various Funds
Use the information below to answer questions 1 and 2:
On August 1, 20X6, the City of Rockhaven received $1,000,000 from a prominent citizen to establish a private-purpose trust fund. The donor stipulated that the cash be permanently invested and that the earnings from the investments be spent to support local artists. During the year ended June 30, 20X7, $50,000 of dividends were received from stock investments and $35,000 of interest was earned from bond investments. At June 30, $5,000 of the interest earned was not yet received. During the year ended June 30, 20X7, $75,000 was spent by the trust fund to support local artists.
1. For the year ended June 30, 20X7, the trust fund should report investment earnings of
a. $80,000.
b. $50,000.
c. $85,000.
d. $35,000.
2. For the year ended June 30, 20X7, the trust fund should report the $75,000 spent to support local artists as a
a. Deduction.
b. Contra contribution.
c. Transfer out.
d. Direct adjustment from fund balance.
3. Which of the following statements is (are) correct about agency funds?
I. Agency funds should report investment earnings only when they are both measurable and available.
II. Agency funds are reported on the proprietary funds’ statement of cash flows.
a. I only.
b. II only.
c. I and II.
d. Neither I nor II.
Note: Use the following information to answer questions 4 through 8.
On July 2, 20X6, the Village of Westbury established an internal service fund to service the data processing needs of the other village departments. The internal service fund received a transfer of $600,000 from the general fund and a $100,000 long-term advance from the water utility enterprise fund to acquire computer equipment. During July of 20X6, computer equipment costing $650,000 was acquired. The following events occurred during the year ended June 30, 20X7:
Charges for services to other departments for data |
|
processing services rendered | $100,000 |
Operating expenses (exclusive of depreciation expense) | 45,000 |
Depreciation expense | 40,000 |
Interest expense on the advance | 5,000 |
At June 30, 20X7, all but $7,000 of the billings were collected, and all operating expenses and the interest expense were paid except for $3,000 of operating expenses.
4. For the year ended June 30, 20X7, what was the income of Westbury’s internal service fund?
a. $13,000.
b. $6,000.
c. $3,000.
d. $10,000.
5. At June 30, 20X7, what total assets amount would appear on the internal service fund balance sheet?
a. $700,000.
b. $710,000.
c. $713,000.
d. $708,000.
6. Assume that the mayor’s office and the police department were billed $55,000 for data processing work during the year ended June 30, 20X7. What account should be debited in the general fund to record these billings?
a. Other Financing Use—Transfers Out.
b. Expenditures.
c. Due to Internal Service Fund.
d. Operating Expenses.
7. Assume that the water utility, an enterprise fund, was billed $25,000 for data processing work during the year ended June 30, 20X7. What account should be debited in the enterprise fund to record these billings?
a. Operating expenses.
b. Other Financing Use—Transfers Out.
c. Expenditures.
d. Due to Internal Service Fund.
8. Assume that the income for Westbury’s internal service fund was $10,000 for the year ended June 30, 20X7. What net assets should be reported on the internal service fund’s statement of net assets at June 30, 20X7?
a. $713,000.
b. $610,000.
c. $710,000.
d. $613,000.
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