The following cash transactions were among those reported by Cambridge County's Wastewater Enterprise Fund for the year: Proceeds from sale of revenue bonds for construction $5,000,000; Interest income $300,000; Capital contributed by developers $1,000,000. In the Wastewater Enterprise Fund's statement of cash flows for the year ended December 31, what amount should be reported as cash flows from capital and related financing activities?

• A. $6,000,000
• B. $5,000,000
• C. $1,000,000
• D. $300,000

Answer: (A)

In a governmental enterprise fund, cash flows from capital and related financing activities include debt proceeds used for capital purposes and capital contributions from external parties. The $5,000,000 from issuing revenue bonds for construction and the $1,000,000 in capital contributions from developers are both financing activities. The $300,000 of interest income is considered an investing activity, not part of capital financing. So the total cash flows from capital and related financing activities equal 5,000,000 + 1,000,000 = 6,000,000.