Where and how should capital assets used by an enterprise fund be reported?

• A. In the enterprise fund and show net of accumulated depreciation
• B. In the government-wide statements
• C. In the general fund
• D. In the capital projects fund

Answer: (D)

Capital assets that will be used by an enterprise fund are tracked in the Capital Projects Fund during their acquisition or construction. This fund is used to account for resources set aside for major capital purchases that will serve government operations, including those serving enterprise activities. The construction costs are accumulated there and funded through the project's sources; once the asset is placed in service, it becomes the enterprise fund’s responsibility and is reported accordingly in the appropriate financial statements. This keeps the funding and progress of the capital asset clear before it is transferred to ongoing operations.