Exam 8: Long-Term Obligations

A government that is unable to satisfy claims against it

In accounting for operating leases,the rental payments should be recognized as expenditures in a governmental fund and as expenses in the government-wide statement of activities in the periods in which they apply.

Easterly City has $47 million of debt recorded in its schedule of changes in long-term obligations,made up of $30 million of general obligation debt,$1 million of compensated absences payable,$4 million of claims and judgments,and $12 million of obligations under capital leases.The state limits the amount of general obligation debt that can be issued by a city to 20 percent of the assessed value of its taxable property.The assessed value of property in Easterly City is $250 million.The city's legal debt margin is

General obligation debt is the obligation of the government at large and is thereby backed by the government's general credit and revenue-raising powers.

A major exception to the general rule of expenditure accrual for governmental funds of a state or local government relates to unmatured Interest on General Principal of general Long-term debt Long-term debt a) Yes No b) No Yes c) Yes Yes d) No No

General long-term debt of a government includes

Governments may enter into operating leases,but may not enter into capital leases.

When the proceeds of general long-term debt are received by a governmental fund,rather than reporting a liability on the balance sheet,the inflow of resources is treated as an other financing source on the operating statement.

A city's electric utility enterprise fund made its annual interest payment on its outstanding $20 million of 6 percent bonds,which were originally issued at a premium.The city maintains its books and records in a manner that facilitates preparation of fund financial statements.The entry to record the interest payment would include a credit to cash for the amount of the interest checks written and debits)to

Overlapping debt should be reported in which of the following ways?

In governmental fund financial statements,the assets acquired under a capital lease would be reported at

Beaver city entered into a long-term capital lease for some office equipment.The city maintains its books and records in a manner to facilitate preparation of fund financial statements.What entry should be made in its general fund to record this event?

When the proceeds of long term debt are reported in governmental fund financial statements

In the government-wide financial statements,the assets acquired under a capital lease would be reported at

Obligations of property owners within a particular government for their proportionate share of debts of other governments with whom their government shares boundaries are called

Pacheco City issued $20 million of bonds at par.The city loaned the proceeds to Sharpe Cheese Processors to expand the size of its facility,which would allow Sharpe to hire additional workers.The loan payments from Sharpe to the city are established to match the principal and interest payments on the bond issue.The bonds are payable exclusively from the loan repayments by Sharpe.The bonds are secured by the additional plant facilities built by Sharpe.Where should the city report the bonds in its annual financial report?

Which of the following is likely to be used by a bond rating agency to rate a government's general obligation bonds?

Financial analysts look at the ratio of assessed value of property to total market value of property as a measure of a government's ability to issue new revenue bonds.

In a bond covenant,a city agreed to create and maintain a $2 million reserve.These funds can be used

Although governments may elect to report conduit debt in their government-wide and proprietary fund statements,the GASB has ruled that note disclosure is sufficient.