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:

$200,000

$180,000

$150,000

$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

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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