ACC 410 Week 11 Final Exam – Strayer
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Chapter 6 Through 15
Part 1: Chapter 6 Through 10
Part 2: Chapter 11 Through 15
Governmental Activities -
Accounting for Capital Projects and Debt Service
TRUE/FALSE (CHAPTER 6)
1. The resources to service all long-term
debts of the governmental entity are typically accounted for in debt service
funds.
2. When governments establish capital projects
funds, they may choose to maintain a separate fund for each major project, or
they may choose to combine two or more projects in a single fund.
3. GASB Statement No. 34 does not require a
budgetary comparison statement for capital projects funds as it does for the
general fund and for each major special revenue fund that has a legally adopted
annual budget.
4. Capital projects funds do not report
long-term obligations in the fund.
5. When bonds are issued at a premium, the
capital projects fund can transfer those excess resources to the debt service
fund.
6. When bonds
are issued at a discount, the debt service fund usually transfers an amount to
the capital projects fund to make up for the deficiency.
7. In
accounting for costs incurred on a major construction project in a capital
projects fund, the construction outlays would be accumulated in a long-term
asset account.
8. Debt
service funds are maintained to account for resources accumulated to pay
interest and principal on general long-term debt—that is, long-term debt
associated primarily with governmental activities.
9. In
contrast to the accounting for debt service fund expenditures, the interest
revenue on bonds held as investments should be accrued in the period the
revenue is earned.
10. Special
assessments are imposed nonexchange transactions, similar to property tax
levies.
11. The
interest paid on debt issued for public purposes by state and local governments
is generally subject to federal taxation.
12. Nongovernmental not-for-profits must account
for defeasances differently than governments.
MULTIPLE CHOICE (CHAPTER 6)
1. The capital project fund of a governmental
entity is accounted for using which of the following bases of accounting?
a)
Budgetary basis.
b)
Cash basis.
c)
Modified accrual basis.
d)
Accrual basis.
2. In which fund type would a governmental entity’s
capital project fund be found?
a)
Governmental fund type.
b)
Proprietary fund type.
c)
Fiduciary fund type.
d)
Capital project fund type.
3. The debt service fund of a governmental entity is accounted
for using which of the following bases of accounting?
a)
Budgetary basis.
b)
Cash basis.
c)
Modified accrual basis.
d)
Accrual basis.
4. In which fund type would a governmental
entity’s debt service fund be found?
a) Governmental fund type.
b)
Proprietary fund type.
c)
Fiduciary fund type.
d)
Capital project fund type.
5. With regard to the resources dedicated to
the acquisition of fixed assets which will be used in general government activities,
which of the following is true?
a) Governments must maintain capital project
funds for resources that are legally restricted to the acquisition of fixed
assets.
b)
Governments may maintain capital project funds for resources that are
legally restricted to the acquisition of fixed assets.
c)
Governments may account for any resources dedicated (whether legally or
not) to the acquisition of fixed assets in any of the governmental funds.
d)
Government must account for all resources set aside for fixed asset
acquisition in a capital project fund.
6. Salt City issued $5 billion of bonds at face
value to fund the reconstruction of the major interstate highways in and around
their city. The bond underwriters withheld
$2 million for underwriting fees and remitted the balance to the City. Assuming the City maintains its books and
records in a manner that facilitates the preparation of fund financial
statement, how would the underwriting fee be accounted for in the capital
project fund?
a)
Reduce Other financing sources $2 million.
b)
Reduce Bonds payable $2 million.
c)
Increase Expenditures $2 million.
d)
It would not be accounted for in the capital project fund.
7. Sugar City issued $2 million of bonds to
fund the construction of a new city office building. The bonds have a stated rate of interest of
5% and were sold at 101. Which of the
following entries should be made in the Capital Project Fund to record this
event?
a)
Debit Cash $2.02 million; Credit Bonds Payable $2 million and Premium on
Bonds Payable $.02 million.
b)
Debit Cash $2.02 million; Credit Bonds Payable $2 million and Other
Financing Sources $.02 million.
c)
Debit Cash $2.02 million; Credit Other Financing Sources $2.02 million.
d)
Debit Cash $2.02 million; Credit Other Financing Sources $2 million and
Revenue $.02 million.
Use the following information to
answer questions # 8 and #9
Voters
in Lincoln School District approved the construction of a new high school and
approved a $10 million bond issue with a stated rate of interest of 6% to fund
the construction. Bids were received
and the low bid was $10 million. When
the bonds were issued, they sold for face value less bond underwriting fees of
$.5 million. The School Board voted to
fund the balance of the construction by a transfer from the general fund.
8. The entry in the capital project fund to
record the receipt of the bond proceeds would be
a)
Debit Cash $9.5 million; Credit Bonds Payable $9.5.
b)
Debit Cash $9.5 million; Credit Other Financing Sources $9.5.
c)
Debit Cash $9.5 million and Expenditures $.5 million; Credit Bonds
Payable $10 million.
d)
Debit Cash $9.5 million and Expenditures $.5 million; Credit Other
Financing Sources $10.
a)
Debit Due from General Fund $.5 million; Credit Other financing Sources
$.5 million.
b)
Debit Due from General Fund $.5 million; Credit Revenue $.5 million.
c)
Debit Cash $.5 million; Credit Due to General Fund $.5 million.
d)
Debit Other Financing Sources $.5 million; Credit Due to General Fund
$.5 million.
Use the following information to
answer questions #10 and #11
Voters in Phillips City approved the construction of a
new $10 million city hall building and approved a $10 million bond issue with a
stated rate of interest of 6% to fund the construction. When the bonds were issued, they sold for
101. What are appropriate entries related
to the premium?
10. In the
capital project fund
a)
Debit Cash $100.000; Credit Revenues $100,000 ; no other entries
required.
b)
Debit Cash $100,000; Credit Other Financing Sources $100,000; No other
entries required.
c) Debit Cash $100,000; Credit Revenues; ALSO
Debit Other Financing Uses—Nonreciprocal
Transfer $100,000; Credit Cash $100,000
11. In the
debt service fund
a) Debit Cash $100.000; Credit Revenues
$100,000 ; no other entries required.
b)
Debit Cash $100,000; Credit Other Financing Sources—Nonreciprocal
Transfer $100,000; No other entries
required.
c) Other Financing Sources—Nonreciprocal
Transfer $100,000; credit Cash $100,000.
12. Sister City was notified by the State that
they had been awarded a $6 million grant to aid in the construction of a senior
citizens center. At the time of the
notification what is the appropriate entry in the capital project fund
(assuming that the City maintains its books and records in a manner to
facilitate the preparation of the fund financial statements)?
a)
No entry at the time of the notification
b)
Debit Grants Receivable $6 million; Credit Revenue $6 million
c)
Debit Grants Receivable $6 million; Credit Deferred Revenue $6 million.
d)
Debit Grants Receivable $6 million; credit Other Financing Sources—Nonreciprocal
Transfer $6 million.
13. Previously Rose City issued bonds with a
face value of $10 million to construct a new city maintenance facility. Assuming that the City maintains its books
and records in a manner that facilitates the preparation of the fund financial
statements, what is the appropriate entry when the City receives a progress
billing from the contractor?
a)
Debit Building; Credit Cash
b)
Debit Building; Credit Accounts Payable.
c)
Debit Expenditure; Credit Accounts Payable
d)
No entry is required.
14. Previously Atomic City had issued bonds with
a face value of $10 million to construct a new city hall. Because the money will not be needed for
several months, the city invested the bond proceeds in U.S. Government
securities. Assuming that the city
maintains its books and records in a manner that facilitates the preparation of
the fund financial statements, what is the appropriate entry when the City
receives interest on the investments?
a)
Debit Cash; Credit Revenue.
b)
Debit Cash; Credit Other Financing Source
c)
Debit Cash; Credit Deferred
Revenue
d)
No entry required.
15. A City issued bonds for the purpose of
financing a major capital improvement.
Which fund is the most appropriate fund in which to record the receipt
of the bond proceeds?
a)
General Fund.
b)
Special Revenue Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
16. Use of a Debt Service Fund is required
a)
When financial resources are being accumulated for the purpose of paying
for capital asset acquisition.
b)
When financial resources are being accumulated for the purpose of paying
principal and interest when it matures.
c)
For all bonded debt service payments.
d)
For all debt service payments.
17. Six years ago Hill City issued $10 million of
6% term bonds, due 30 years from the date of issue. Interest on the bonds is payable
semi-annually on January 1 and July 1.
Hill City has a September 30 fiscal year end. The amount of interest payable that would be
included on the balance sheet for the debt service fund of Hill City at
September 30 would be
a)
$ -0-
b)
$150,000
c)
$300,000
d)
$600,000
18.
Sue City has outstanding $5 million in general term bonds used to finance the construction of the
new City Library. Sue City has a June 30
fiscal year-end. Interest at 6% is
payable each January 1 and July 1. The
principal of the bonds is due 10 years in the future. The City budgeted the July 1, 1999 interest
payment in the budget for the fiscal year ended June 30, 1999. On June 30, cash was transferred from the
General Fund to the Debt Service Fund to make the required payment. The maximum amount of interest payable that
may be included on the balance sheet of the debt service fund of Sue City at
June 30 would be
a)
$ -0-
b)
$150,000.
c)
$300,000.
d)
$3,000,00.
Use the following information to
answer questions #19 and #20
Calhoun County makes annual transfers from the general
fund to the debt service fund to pay principal and interest on long-term debt.
19. When the
County makes the transfer the entry in the debt service fund should be
a)
Debit Cash; Credit Revenue.
b)
Debit Cash; Credit Other Financing Sources.
c)
Debit Cash; Credit Interest Payable.
d)
Debit Cash with Fiscal Agent; Credit Other Financing Sources.
20. In
the debt service fund, what is the appropriate entry when the principal payment
is made?
a)
Debit Bonds Payable; Credit Cash.
b)
Debit Expenditures; Credit Cash.
c)
Debit Other Financing Uses—Nonreciprocal
Transfer; Credit Cash.
d)
No entry is required.
Use the following information to
answer questions #21 and #22.
The
citizens of a specific area of the City of Arlington approved the construction
of sidewalks in their residential neighborhood and approved a $1 million bond
issue to finance construction of those sidewalks. The citizens agreed to tax themselves for 20
years in an amount sufficient to pay principal and interest on the bonds. The City will oversee the construction of the
sidewalks and act as agent for servicing the debt. The City does not guarantee the debt nor does
it assume any legal or moral obligation for the bonds.
21. The proceeds of the bond issue should be
recorded in which fund of the City of Arlington?
a)
Agency Fund.
b)
Special Assessment Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
22. When the City collects the special tax, the
proceeds of that tax should be accounted for in which fund of the City of
Arlington?
a)
Agency Fund.
b)
Special Assessment Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
Use the following information to
answer questions #23 - #25.
The citizens of a specific area of the City of
Arlington approved the construction of sidewalks in their residential
neighborhood and approved a $1 million bond issue to finance construction of
those sidewalks. The citizens agreed to
a special tax on their property for 20 years in an amount sufficient to pay
principal and interest on the bonds. The
City will oversee the construction of the sidewalks and act as agent for
servicing the debt. If the special tax
is not sufficient to make the principal and interest payments, the City will
assume the obligations.
23. The
proceeds of the bond issue should be recorded in which fund of the City of
Arlington?
a)
Agency Fund.
b)
Special Assessment Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
24.
When the City collects the special tax, the proceeds of that tax should
be accounted for in which fund of the City of Arlington?
a)
Agency Fund
b)
Special Assessment Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
a)
Debit Taxes Receivable; Credit Revenues.
b)
Debit Taxes Receivable; Credit Deferred Revenues.
c)
Debit Taxes Receivable; Credit Liability.
d)
Debit Taxes Receivable; Credit Fund Balance.
26.
Adams County has outstanding $10 million in bonds issued by the County
to construct a sewer system in a specific area of the county. The taxpayers in that area voted for the
construction and the bonds and agreed to tax themselves to pay the principal
and interest on the bonds. The County
contracted for the construction and issued the bonds but the City assumed no
legal or moral obligation for the bonds.
If the special tax payments are not sufficient to make the required
principal and interest payments, the County will not make up the
difference. The $10 million of bonds
should appear in which fund financial statements or schedule?
a)
Capital Project Fund.
b)
Special Assessment Fund.
c)
Schedule of Long-term
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