The Five Sections for Reporting Items in an Internal Service

question 12

Essay

The five sections for reporting items in an Internal Service Fund Statement of Cash Flows prepared using the direct method excluding the reconciliation of operating income to cash flows from operations are:
A. Operating Activities
B. Noncapital Financing Activities
C. Capital and Related Financing Activities
D. Investing Activities
E. Noncash Investing, Capital, and Financing Activities
Using these five sections, indicate in which section each of the following Internal Service Fund transactions should be reported. If a transaction should not be reported on the Statement of Cash Flows, indicate it using the letter "X".
1. Purchase of an Internal Service Fund capital asset for cash.
2. Providing services to other funds on a cash basis.
3. Issuing refunding bonds to refinance bonds issued 10 years ago to provide financing for capital asset acquisitions.
4. Sale of Internal Service Fund capital assets for cash.
5. Transfer from a Special Revenue Fund for the specific purpose of financing an Internal Service Fund capital asset purchase.
6. Payment of office workers' salaries.
7. Amortization of the Deferred Interest Expense Adjustment created when the capital asset debt was refunded.
8. Transfer to a Capital Projects Fund to provide financing for a general government capital asset construction project.
9. Purchases of investments with cash received from issuing bonds to finance construction of Internal Service Fund capital assets.
10. Transfer to the General Fund for the purpose of financing specific operating costs of a department accounted for in that fund.
11. Issuing bonds to provide operating cash for the Internal Service Fund.
12. Signing a capital lease for equipment to be used by activities accounted for in the Internal Service Fund.
13. Interest received during the year earned on investments.
14. Transfer the proceeds from the sale of an Internal Service Fund capital asset to the General Fund.
15. Depreciation on Internal Service Fund capital assets.
16. Proceeds of bonds issued to finance construction of Internal Service Fund capital assets.
17. Interest paid on bonds issued to finance construction of an Internal Service Fund capital asset.
18. Principal retirement payments on bonds issued to finance construction of Internal Service Fund capital assets
19. Unrealized gain on investments held at year end.
20. Receipt of a capital grant for an ongoing Internal Service Fund capital asset construction project.
A. Operating Activities
B. Noncapital Financing Activities
C. Capital and Related Financing Activities
D. Investing Activities
E. Noncash Investing, Capital, and Financing Activities
Using these five sections, indicate in which section each of the following Internal Service Fund transactions should be reported. If a transaction should not be reported on the Statement of Cash Flows, indicate it using the letter "X".

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Definitions:

Customers' Needs

The requirements or desires that clients seek to fulfill with products or services.

Manufacturer's Profits

The net income a manufacturing company earns after deducting all of its operating expenses from its revenue.

Cannibalization

The reduction in sales of a product as a result of the introduction of a similar product by the same company.

General Mills

An American multinational manufacturer and marketer of branded consumer foods sold through retail stores.