ExpertMedium1 markMultiple Choice
CPA · Question 36 · Area III: State & Local Governments
City of Oakwood's Water Utility Fund (an Enterprise Fund) billed customers $500,000 for services. It collected $480,000. It incurred $300,000 in operating expenses, of which $280,000 was paid. Depreciation expense was $50,000. What is the Change in Net Position for the fund?
City of Oakwood's Water Utility Fund (an Enterprise Fund) billed customers $500,000 for services. It collected $480,000. It incurred $300,000 in operating expenses, of which $280,000 was paid. Depreciation expense was $50,000. What is the Change in Net Position for the fund?
Answer options:
A.
$200,000
B.
$180,000
C.
$150,000
D.
$130,000
How to approach this question
Enterprise Funds use Full Accrual. Revenue = Billed (not collected). Expenses = Incurred (not paid). Depreciation is an expense.
Full Answer
C.$150,000✓ Correct
C
Proprietary funds use the accrual basis. Revenue is recognized when earned (billed), and expenses when incurred. Change in Net Position = $500,000 (Revenue) - $300,000 (Op Expense) - $50,000 (Depreciation) = $150,000.
Common mistakes
Using cash basis or modified accrual logic.
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