Exam 6: Accounting for Capital Projects and Debt Service

In early 2014,Jackson City issued $10 million of 6 percent term bonds to finance a highway construction project.Because of problems related to the Endangered Species Act,the city deferred highway construction that year.In early 2015,the city entered into contracts for construction that will begin in summer 2015 and be completed by summer 2016.When the city realized they would not need the bond proceeds in 2015,they invested the proceeds in risk-free federal government securities bought to yield 7 percent.What potential arbitrage liability,if any,should the city recognize as a result of the year 2015 transactions?

Special assessment debt to be paid from a water utility fund should be accounted for in that fund along with the related capital improvements.

When the county makes the transfer the entry in the debt service fund should be

When bonds are issued at a premium,the capital projects fund can transfer those excess resources to the debt service fund.

The capital projects fund of a government is accounted for using which of the following bases of accounting?

The City of Twin Falls issued $5 million in special assessment bonds to finance major reconstruction of the turbines and facilities used in generating electricity that is sold to the citizens in the surrounding area.The electric power distribution activities are accounted for in an enterprise fund,which will service the debt.If the city is legally obligated for the debt,the appropriate entry in the city's Electric Enterprise Fund to record this event is

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.

In the debt service fund,what is the appropriate entry when the principal payment is made?

The resources to service all general long-term debt of governments are typically accounted for in debt service funds.

Previously Rose City issued bonds with a face value of $10 million to construct a new city maintenance facility.Assume that the city maintains its books and records in a manner that facilitates the preparation of fund financial statements.What is the appropriate entry when the city receives a progress billing from the contractor?

When the City of Arlington levies the special assessment tax,the best entry would be

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.

With regard to the resources dedicated to the acquisition of capital assets that will be used in general government activities,which of the following is true?

Proceeds of debt issued to finance a capital project should be reported in a capital projects fund as a liability until the project is completed.

Nongovernmental not-for-profits must account for defeasances differently than governments do.